If Short-Term and Long-Term Interest Rates Are Currently Equal and the Fed

question 199

Multiple Choice

If short-term and long-term interest rates are currently equal and the Fed contracts the money supply, the yield curve would be expected to:

• A)become downward sloping.
• B)become upward sloping.
• C)become vertical.
• D)be unaffected.

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Definitions:

Price Changes

Adjustments in the cost of goods or services in the economy, which can be influenced by factors such as supply and demand or inflation.

Output Quota

A limit set, usually by a governing body, on the amount of a product that can be produced or sold within a certain period.

Oligopoly

A market structure dominated by a small number of large firms, leading to limited competition and often higher prices.

Collusive Control

Practices whereby firms in the same industry conspire to control market competition, often through price fixing, market allocations, or production quotas, in violation of antitrust laws.