If the Fed Is Concerned About Inflation,its Actions ________ Long-Term

question 27

Multiple Choice

If the Fed is concerned about inflation,its actions ________ long-term interest rates so that investment ________ and net exports ________.

• A)lower;increases;increase
• B)lower;increases;decrease
• C)raise;decreases;decrease
• D)lower;decreases;decrease
• E)raise;increases;increase

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Definitions:

Interest Rate Futures

Financial derivatives contracts that lock in the future delivery of an asset based on interest rates, commonly used for hedging and speculating on future interest rate movements.

Hedge

An investment made to reduce the risk of adverse price movements in an asset, often involving derivatives like options and futures.

Basis Risk

Risk attributable to uncertain movements in the spread between a futures price and a spot price.

Short Hedger

An investor who enters into futures contracts to protect against potential price declines in an asset they hold.