According to the Expectations Theory, If the Market Believes That

question 60

Multiple Choice

According to the expectations theory, if the market believes that interest rates are likely to decrease in the near future,

• A) borrowers would immediately increase their supply of short-term securities.
• B) investors would immediately increase their demand for long-term securities.
• C) borrowers would immediately increase their supply of long-term securities.
• D) neither borrowers nor investors would do anything until the interest rates actually increase.
• E) both a and b

---

Definitions:

Regression Analysis

A set of statistical processes for estimating the relationships among variables.

Residual

The difference between an observed value and the value predicted by a model.

Multiple Regression Model

A statistical technique used to predict the value of a dependent variable based on the values of two or more independent variables.

Multiple Coefficient

Often refers to the multiple correlation coefficient in statistics, describing the strength and direction of a linear relationship between more than two variables.