Under the Pure Expectations Hypothesis and Constant Real Interest Rates

question 36

Multiple Choice

Under the pure expectations hypothesis and constant real interest rates for different maturities, an upward-sloping yield curve would indicate ________.

• A) expected increases in inflation over time
• B) expected decreases in inflation over time
• C) the presence of a liquidity premium
• D) that the equilibrium interest rate in the short-term part of the market is lower than the equilibrium interest rate in the long-term part of the market

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