The Term Structure of Interest Rates or the Yield Curve

question 122

Multiple Choice

The term structure of interest rates or the yield curve:

• A) is normal when short-term rates are higher than long-term rates.
• B) is inverted when short-term rates are lower than long-term rates.
• C) shows the yield to maturity for securities of equal risk over time.
• D) is always flat in the short-term.

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Definitions:

Resource Prices

The cost of inputs used in the production of goods and services, such as labor, capital, land, and raw materials.

Marginal Revenue Product

The extra income obtained through the use of an additional unit of a resource, for example, capital or labor.

Wage Rates

The amount of money paid to an employee by an employer for a unit of time worked or for a certain amount of work completed.

Labor Demand

Denotes the quantity of labor that employers are willing to hire at a given wage rate in a given time period.