Use the Following to Answer Questions

question 148

Multiple Choice

Use the following to answer questions .
Exhibit: The Bond Market
-(Exhibit: The Bond Market) Suppose the Fed takes action that shifts the demand curve from D to D′, as illustrated in Panel (a) . What happens to the interest rate?

• A) It will increase.
• B) It will decrease.
• C) It remains unchanged.
• D) Short-term interest rates will decrease but long-term interest rates will increase.

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Definitions:

Maturity

The date on which a financial instrument, such as a bond or loan, is due to be repaid in full.

Operating Line of Credit

A flexible loan from a bank that provides a maximum loan balance that the borrower can access for its short-term capital needs.

Company's Liquidity

An indicator of a company's ability to meet its short-term financial obligations, ensuring it has enough cash or liquid assets.

Interest (Finance) Expenses

Costs incurred by an entity for borrowed funds; these expenses may include the cost of debt or loan interest payments.