Suppose There Is an Increase in the Short- Term Interest

question 22

Multiple Choice

Suppose there is an increase in the short- term interest rate. Given this increase in the current short- term interest rate, which of the following will most likely occur?

• A) The long- term interest rate will decrease.
• B) The long- term interest rate will increase, but by less than the short- term rate.
• C) The long- term interest rate will remain the same.
• D) The long- term interest rate will increase by more than the short- term rate.
• E) The long- term interest rate will increase by the same amount as the short- term rate.

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Definitions:

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