An Inverted Yield Curve Implies That

question 49

Multiple Choice

An inverted yield curve implies that

• A)long-term interest rates are lower than short-term interest rates.
• B)long-term interest rates are higher than short-term interest rates.
• C)long-term interest rates are the same as short-term interest rates.
• D)intermediate term interest rates are higher than either short- or long-term interest rates.
• E)None of the options

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Definitions:

Assets

Resources owned by a business from which future economic benefits are expected to flow to the enterprise.

Equity

The value of an ownership interest in property or a business, calculated as total assets minus total liabilities; represents what the owners' claim on the assets is.

Entity Assumption

The accounting principle that treats a business as a separate legal and accounting entity, distinct from its owners, managers, or operators.

Historical Cost Principle

An accounting principle that assets should be recorded and reported at their original purchase cost.