In an Effort to Maintain Price Stability, It Is Expected

question 92

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

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Definitions:

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Sigmund Freud, an Austrian neurologist known for founding psychoanalysis, a method for treating psychopathology through dialogue.