Which One of the Following Conditions When Combined with Long-Term

question 204

Multiple Choice

Which one of the following conditions when combined with long-term, fixed-rate, low interest loans would tend to increase the financial risk of lending institutions the most?

• A) Volatile short-term rates that are relatively low.
• B) Volatile short-term rates that are relatively high.
• C) Fixed short-term rates that are relatively low.
• D) Volatile long-term rates that are relatively low.
• E) Fixed long-term rates that are relatively low.

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Definitions:

Perfect Substitutes

Two goods that could be used in place of each other with no loss of utility to the consumer.

Perfect Complements

Goods that are always used together in fixed proportions, where the consumption of one good requires the consumption of a specific quantity of another good.

Indifference Curves

Graphs representing combinations of goods among which a consumer is indifferent, showing trade-offs in consumption preferences.

Marginal Utility

The extra pleasure or advantage obtained from using an additional unit of a product or service.