In Actual Practice,short-Term Interest Rates Are Just as Likely to Fall

question 76

Multiple Choice

In actual practice,short-term interest rates are just as likely to fall as to rise; this is the major shortcoming of the

• A) market segmentation theory.
• B) expectations theory.
• C) liquidity premium theory.
• D) separable markets theory.

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Definitions:

Fixed Costs

Expenses that do not change in the short term regardless of the level of production or sales, such as rent and salaries.

Average Total Cost Curve

A graph that shows the per unit cost of production at various levels of output.

Short-Run

A time period in which at least one factor of production is fixed, limiting the ability of firms to adjust to changes in market conditions fully.

Marginal Cost Curve

A graphical representation that shows the change in total cost when an additional unit is produced; typically upward-sloping due to increasing marginal costs.