Which Term-Structure Hypothesis Suggests That Any Long-Term Interest Rate Simply

question 30

Multiple Choice

Which term-structure hypothesis suggests that any long-term interest rate simply represents the geometric mean of current and future on-year interest rates expected to prevail over the maturity of the issue?

• A) expectations hypothesis
• B) liquidity preference hypothesis
• C) segmented market hypothesis
• D) preferred habitat hypothesis
• E) hedging pressure hypothesis

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Definitions:

Returns To Scale

A term in economics that describes how the change in the amount of input affects the change in output of a production process.

Production Function

Describes the relationship between the quantities of inputs used in production and the quantity of output produced, illustrating how input changes affect output.

Returns To Scale

Refers to how the output of a production process changes as all input quantities are scaled up or down.

Marginal Products

The additional output that is produced by employing one more unit of a specific input, while keeping other inputs constant.