According to the Expectations Theory of the Term Structure

question 33

Multiple Choice

According to the expectations theory of the term structure

• A)when the yield curve is steeply upward sloping,short-term interest rates are expected to remain relatively stable in the future.
• B)when the yield curve is downward sloping,short-term interest rates are expected to remain relatively stable in the future.
• C)investors have strong preferences for short-term relative to long-term bonds,explaining why yield curves typically slope upward.
• D)yield curves should be equally likely to slope downward as slope upward.

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Definitions:

Total Industry Output

The aggregate production of goods and services in a specific industry within a given period.

Marginal Cost

The cost of producing one additional unit of a good or service, reflecting changes in variable costs.

Cartel

An agreement among competing businesses to control prices or exclude entry of a new competitor in the market, aiming at maximizing their profits collectively.

Fixed Cost

Costs that do not vary with the level of output produced, such as rent, salaries, and some utilities.