In an Effort to Maintain Price Stability,it Is Expected That

question 91

Multiple Choice

In an effort to maintain price stability,it is expected that the European Central Bank will raise interest rates in the future.Which of the following is the most likely effect of such an action on short- and long-term interest rates in Europe?

• A)Long-term interest rates will tend to be higher than short-term interest rates.
• B)Long-term interest rates will be about the same as short-term interest rates.
• C)Both long- and short-term interest rates would be expected to fall sharply.
• D)No relative change in short and long term interest rates could be predicted.

---

Definitions:

Technological Improvement

Refers to advancements in technology that increase productivity and efficiency in the production process, enhancing the quality and capabilities of goods and services.

Capitalist

An economic system characterized by private or corporate ownership of capital goods, investments determined by private decision, and prices, production, and the distribution of goods determined mainly by competition in a free market.

Socialist Economies

Economic systems based on collective or governmental ownership of the means of production and distribution of goods, where allocation is based on equality or need.

Economic System

A framework that defines how economic activities, including production, distribution, and consumption of goods and services, are organized and governed within a society.