The Theory of the Term Structure of Interest Rates, Which

question 58

Multiple Choice

The theory of the term structure of interest rates, which suggests that long-term rates are determined by the average of short-term rates expected over the time that a long-term bond is outstanding, is the

• A) expectations hypothesis.
• B) segmentation theory.
• C) liquidity premium theory.
• D) market average rate theory.

---

Definitions:

GDP Deflator

A scale for assessing the cost of all newly manufactured, domestic final goods and services in a country's economy.

Real GDP

The measure of a country's economic output adjusted for price changes and inflation, reflecting the true value of goods and services produced.

Percentage Change

A mathematical calculation that indicates the degree of change over time, expressed as a percentage.

National Income

The total value of all goods and services produced by a country's economy over a specific period, including income received from abroad.