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If a Bank Is Asked to Quote a Rate on a One-Year

question 34

True/False

If a bank is asked to quote a rate on a one-year loan one year from today and the current interest rate on a one-year loan is 7% and a two-year loan is 8%,it should quote 9%.


Definitions:

Consumer Surplus

The variance between the sum consumers are willing to shell out for a good or service and the sum they actually shell out.

Equilibrium Price

The price at which the quantity of a good or service demanded equals the quantity supplied, leading to a balance in the market.

Producer Surplus

The discrepancy between the price at which producers are prepared to offer a good or service and the price they actually obtain.

Demand Shifts

Refers to the change in the quantity demanded of a good or service at any given price, caused by factors other than the price of the good itself.

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