Long-Term Interest Rates May Not Closely Follow Short-Term Interest Rates

question 31

Multiple Choice

Long-term interest rates may not closely follow short-term interest rates if

• A)People prefer to hold transactions accounts over cash.
• B)The required reserve ratio decreases.
• C)Lenders are reluctant to make loans.
• D)The Fed intervenes in the bond market.

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Definitions:

Normal Approximation

The process of using the normal distribution to approximate the distribution of a sample statistic.

Standardized Test Statistic

A statistic that has been transformed to have a mean of zero and a standard deviation of one, used in hypothesis testing.

P-value

A statistical measure that helps scientists and researchers determine the significance of their results, representing the probability of observing the collected data, or something more extreme, if the null hypothesis were true.

Z-test Approximation

A statistical method that uses the Z-distribution to approximate the significance of observed differences, typically used when sample sizes are large and the standard deviation is known.