If Long-Term Interest Rates Are 8% and Short-Term Rates Are

question 13

Multiple Choice

If long-term interest rates are 8% and short-term rates are 3%, the market expects:

• A) short-term rates to fall.
• B) short-term rates to rise.
• C) short-term rates to remain the same.
• D) there is no relationship between long-term and short-term rates.

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Definitions:

Monetary

Pertaining to currency or money, including policies, management, and the overall financial system that regulates money supply and interest rates in an economy.

Fiscal Policies

Government policies related to taxation and spending with the aim of influencing economic conditions.

Fiscal Policy Stimulus

Government measures, typically involving increased public spending and tax cuts, aimed at boosting economic activity.

Interest Rates

The cost of borrowing money or the reward for saving, usually expressed as a percentage of the amount borrowed or saved.