An Equal Decrease in All Bond Interest Rates

question 105

Multiple Choice

An equal decrease in all bond interest rates

• A)increases the price of a five-year bond more than the price of a ten-year bond.
• B)increases the price of a ten-year bond more than the price of a five-year bond.
• C)decreases the price of a five-year bond more than the price of a ten-year bond.
• D)decreases the price of a ten-year bond more than the price of a five-year bond.

---

Definitions:

Moral Hazard Problem

A situation where one party engages in risky behavior knowing that it is protected against the consequences by another party.

Government's Role

Refers to the duties and functions that a government carries out to ensure the stability and growth of its nation, including legislation, public service provision, and economic management.

Private Sector

The part of the economy that is owned and operated by individuals and companies for profit, as opposed to the state.

Information Difficulties

Challenges encountered in obtaining, processing, or understanding necessary information, often affecting decision-making processes.