Which of the Following Is NOT a Valid Theory That

question 64

Multiple Choice

Which of the following is NOT a valid theory that attempts to explain the shape of the term structure of interest rates?

• A) the unbiased expectations theory
• B) the liquidity preference theory
• C) the market segmentation theory
• D) the Fisher Effect theory

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Definitions:

Law of Diminishing Marginal Utility

The economic principle that states as a person increases consumption of a product, there is a decline in the marginal utility that person derives from consuming each additional unit of that product.

Total Utility

The total satisfaction or benefit derived from consuming a particular quantity of goods or services.

Law of Diminishing Marginal Utility

An economic principle that states the additional satisfaction a consumer gets from purchasing one more unit of a product will lessen with each additional unit purchased.

Marginal Utility

The additional satisfaction or utility that a consumer derives from consuming one more unit of a good or service.