Which of the Following Statements Is CORRECT

question 42

Multiple Choice

Which of the following statements is CORRECT?

• A) If expected inflation increases, interest rates are likely to increase.
• B) If individuals in general increase the percentage of their income
• That they save, interest rates are likely to increase.
• C) If companies have fewer good investment opportunities, interest
• Rates are likely to increase.
• D) Interest rates on all debt securities tend to rise during recessions because recessions increase the possibility of
• Bankruptcy, hence the riskiness of all debt securities.
• E) Interest rates on long-term bonds are more volatile than rates on
• Short-term debt securities like T-bills.

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Definitions:

Capital Account

Represents the net change in physical or financial asset ownership for a nation and includes investments and loans into or out of the country.

Salary Allowance

A fixed amount or portion of an employee's salary allocated for specific expenses, often tax-exempt.