Jian Is a Well-Known Professor of Labor Relations at a Major

question 221

True/False

Jian is a well-known professor of labor relations at a major university. She recently was asked by representatives of labor and management at a nearby corporation to help them resolve a disagreement that threatened to cause a breakdown in negotiations. If Jian agrees to help, her role will be to encourage both parties to continue negotiating and to offer constructive advice and suggestions, but she will not have the authority to render a binding decision. Jian's role is that of a mediator.

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Definitions:

Expectations Theory

A theory that suggests long-term interest rates reflect the market's expectation for future short-term rates, assuming that investors have no preference for long versus short maturities.

Liquidity Preference Theory

A theory ofthe shape of the yield curve. The curveslopes upward because, all other thing equal, investors prefer shorter, moreliquid investments. They must therefore be induced to lend longer withhigher rates

Market Segmentation Theory

A theory of the shape of the yield curve. The debt market is segmented by term, and each segment is independent of the others. Hence, the curve slopes up or down depending on supply and demand conditions in the various market segments.

Liquidity Preference Theory

A theory suggesting that people prefer to hold their wealth in liquid form for convenience and as a precaution against uncertainty, affecting interest rates.