At the End of World War II in 1945,many Economists

question 198

Multiple Choice

At the end of World War II in 1945,many economists and business managers expected that the U.S.economy would enter a severe recession.At that time,Sears and Montgomery Ward were the two largest department store chains in the country.Sears CEO Robert Wood expected continuing prosperity and opened new stores.Montgomery Ward CEO Sewell Avery expected falling incomes and rising unemployment and closed a number of existing stores.The results of their actions were seen during the late 1940s,when

• A)Sears declared bankruptcy and was purchased by Montgomery Ward.
• B)Montgomery Ward weathered the economic downturn in better financial shape than Sears.
• C)Sears rapidly gained market share at Montgomery Ward's expense.
• D)Sears had to close many of the new stores it had opened following the end of the war.

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Definitions:

Term Structure

The relationship between interest rates (or bond yields) and different terms (or maturities), typically depicted in a yield curve.

Expectations Theory

A theory suggesting that long-term interest rates reflect the market's expectation for future short-term rates.

Liquidity Preference Theory

Theory that investors demand a risk premium on long-term bonds. Implies that the forward rate generally will exceed the expected future interest rate.

Treasury Bond

A Treasury bond is a long-term, fixed-interest government debt security with a maturity of 20 to 30 years and pays interest every six months.