According to the Expectations Theory, When the Yield Curve Is

question 42

Multiple Choice

According to the expectations theory, when the yield curve is falling, market participants expect

• A)future long-term interest rates to rise above current short-term rates.
• B)future long-term interest rates to fall below current long-term rates.
• C)future short-term interest rates to rise above current short-term rates.
• D)future short-term interest rates to fall below current short-term rates.

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Definitions:

Buffer

A chemical substance that helps maintain a stable pH in a solution by neutralizing small amounts of added acid or base.

pH

A scale used to specify the acidity or basicity of an aqueous solution, with low values indicating acidity and high values, basicity.

Solutions

Homogeneous mixtures composed of two or more substances where one substance, the solute, is dissolved in another, the solvent.

Proton

A subatomic particle found in the nucleus of an atom, possessing a positive electrical charge.