Macroeconomic Policy

question 39

Multiple Choice

Macroeconomic policy

• A) is an economic function of government that began in the 1960s.
• B) attempts to stabilize the market system in the United States.
• C) attempts to promote fair trade practices among business firms.
• D) consists of monetary and fiscal policies.
• E) deals with internalizing externalities.

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Definitions:

Interest Rate Risk

The potential for investment losses due to fluctuations in interest rates.

Zero Coupon Treasury Bond

A government bond that does not pay interest throughout its life and is sold at a discount from the face value.

Reinvestment Rate Risk

The risk that the returns from reinvesting cash flows will be lower than expected due to changes in interest rate.

Market Interest Rate

The prevailing rate of interest available in the marketplace for securities of similar risk and maturity.