Which of the Following Statements Is Most Correct

question 47

Multiple Choice

Which of the following statements is most correct?

• A) The more highly developed a nation's financial system is,the more likely funds are to flow from savers to borrowers by direct transfers as opposed to through financial intermediaries.
• B) If people in the aggregate have a strong time preference for current consumption as opposed to future consumption,this factor will cause interest rates to be lower than if preferences were more toward future consumption.
• C) If investors expect the rate of inflation to increase in the future,this would tend to cause the current short-term interest rate to be higher than current long-term rates.
• D) The existence of maturity risk premiums is due to the fact that a change in interest rates has more effect on the prices of short-term than long-term bonds.
• E) If a 1-year Treasury bond has a yield of 5 percent,if the expected rate of inflation during the coming year is 3 percent,and if the maturity risk and liquidity premiums on 1-year bonds are zero,then the real risk-free rate r* must be 2 percent.

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Definitions:

Economic Development

The process of improving economic well-being and quality of life through growth and advancement, often measured by GDP growth, employment rates, and infrastructure improvements.

Slavery

A system in which individuals are owned by others as property, deprived of personal freedom, and compelled to perform labor or services.

Kansas-Nebraska Bill

Legislation passed by the U.S. Congress in 1854 that allowed residents of Kansas and Nebraska territories to decide whether to allow slavery, leading to violent conflict in the region known as "Bleeding Kansas."