An Inverted Yield Curve Implies That

question 39

Multiple Choice

An inverted yield curve implies that

• A)long-term interest rates are lower than short-term interest rates.
• B)long-term interest rates are higher than short-term interest rates.
• C)long-term interest rates are the same as short-term interest rates.
• D)intermediate-term interest rates are higher than either short- or long-term interest rates.

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Definitions:

Fixed Cost

Costs that do not change with the level of production or sales, such as rent or salaries.

Marginal Costs

The cost incurred by producing one additional unit of a product or service.

Total Variable Cost

The sum of all costs that vary with the level of output in the short run.

Average Fixed Costs

The fixed costs of production (expenses that do not change with the level of output) divided by the quantity of output produced.