When the Degree of Uncertainty About the Economy Increases, the Spread

question 11

Multiple Choice

When the degree of uncertainty about the economy increases, the spread in the promised yield-to-maturity between high and low-rated bonds tends to

• A) decrease.
• B) increase or decrease depending on the coupon.
• C) widen.
• D) reverse the sign of the spread.

---

Definitions:

Demand Curve

A visual diagram that illustrates the connection between a product's price and the amount consumers want to purchase.

Monopolist

A single seller in a market who has significant control over the price and supply of a particular good or service, facing no competition.

Constant Unit Cost

The situation where the cost to produce each additional unit of output remains unchanged.

Inverse Demand Curve

A graphical representation showing the relationship between the price of a good and the quantity demanded, plotted with price on the y-axis and quantity on the x-axis, inversely.