Which of the Following Interest Rates Tends to Fluctuate the Most

question 70

Multiple Choice

Which of the following interest rates tends to fluctuate the most?

• A) interest rate on corporate bonds
• B) interest rate on 10-year Treasury bonds
• C) mortgage interest rate
• D) federal funds rate

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Definitions:

Moral Hazard Problem

The possibility that individuals or institutions will behave more recklessly after they obtain insurance or similar contracts that shift the financial burden of bad outcomes onto others. Example: A bank whose deposits are insured against losses may make riskier loans and investments.

Adverse Selection Problem

A problem arising when information known to one party to a contract or agreement is not known to the other party, causing the latter to incur major costs. Example: Individuals who have the poorest health are most likely to buy health insurance.

Common Good Problem

Common Good Problem occurs when resources that are freely accessible to all members of a society are overused or depleted, often leading to sustainability issues.

Special-Interest Effect

The phenomenon where policy decisions are influenced or shaped by the lobbying efforts of a small, focused group, often at the expense of the general public.