Assume That Debt Maturity Markets Are Segmented, Such That Short-Term

question 68

Multiple Choice

Assume that debt maturity markets are segmented, such that short-term debt markets are funded by surplus units that are different from the surplus units that fund the long-term debt markets.Ifthe Treasury uses a relatively large proportion of ____ debt to finance the deficit, this may place upward pressure on ____ interest rates.

• A) long-term; long-term
• B) long-term; short-term
• C) short-term; long-term
• D) B and C

---

Definitions:

Velocity of Money

The rate at which money circulates in an economy, typically measured as the ratio of nominal GDP to the money supply.

Final Goods and Services

Products that have completed the production process and are available for purchase by the end consumer.

Money Supply

The entirety of financial assets present in an economy at a given moment, encompassing cash, coins, and funds in checking and savings accounts.

Average Price Level

An index reflecting the overall direction and movement of prices within an economy, serving as an indicator of inflation or deflation over time.