In an Effort to Maintain Price Stability, It Is Expected

question 62

Multiple Choice

In an effort to maintain price stability, it is expected that the European Central Bank will raise interest rates in the future. Which of the following is the most likely effect of such an action on short- and long-term interest rates in Europe?

• A) Long-term interest rates will be about the same as short-term interest rates.
• B) Long-term interest rates will tend to be higher than short-term interest rates.
• C) Both long- and short-term interest rates would be expected to fall sharply.
• D) No relative change in short- and long-term interest rates could be predicted.

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Definitions:

Break-Even Analysis

A financial calculation to determine the volume of production or sales at which total revenues will equal total costs.

Unit Variable Expense

Costs that vary directly with the production of one unit of a product or service.

Break-Even Point

The point at which total costs and total revenue are equal, resulting in no net loss or gain and all fixed costs are covered.

Selling Price

The amount of money charged for a product or service, which can influence demand and revenue.