Assume That the Current Corporate Bond Yield Curve Is Upward

question 13

Multiple Choice

Assume that the current corporate bond yield curve is upward sloping.Under this condition,what could we be sure of?

• A)Inflation is expected to decline in the future.
• B)Long-term bonds are a better buy than short-term bonds.
• C)Maturity risk premiums could help to explain the yield curve's upward slope.
• D)Long-term interest rates are more volatile than short-term rates.

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Definitions:

Perfectly Inelastic

A situation where the quantity demanded or supplied of a good is unaffected by changes in its price.

Upward-Sloping

A term often used in economics to describe a graph line that represents an increase in one variable as another variable increases, typically applied to supply curves.

Demand Curve

A graphical representation showing the relationship between the price of a good or service and the quantity demanded for a given period.

Tax Incidence

An examination of the distribution of tax burdens, including who ultimately pays the tax (consumers or producers) and how it affects market equilibrium.