We Would Expect the Risk Spread Between Baa Bonds and U.S

question 105

Multiple Choice

We would expect the risk spread between Baa bonds and U.S. Treasury securities of the same maturities to:

• A) Widen during periods of economic recession
• B) Remain relatively constant over the business cycle
• C) Decrease during economic slowdowns
• D) Increase during economic growth periods

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Definitions:

M2

A measure of the money supply that includes all elements of M1 (cash and checking deposits) plus savings deposits, money market mutual funds, and other time deposits.

M1

A segment of the money supply encompassing all tangible currency, such as bills and coins, in addition to demand deposits, checking accounts, and negotiable order of withdrawal (NOW) accounts.

Credit Cards

Credit cards are payment cards issued to users to enable the cardholder to pay a merchant for goods and services, based on the cardholder's promise to the card issuer to pay them for the amounts plus other agreed charges.

Checkable Deposits

Bank account balances that can be drawn upon by writing a check or using a debit card, functioning as money for everyday transactions.