Suppose There Is a Decrease in the Short-Term Interest Rate

question 60

Multiple Choice

Suppose there is a decrease in the short-term interest rate.Give this reduction in the current short-term interest rate,which of the following will most likely occur?

• A)the long-term interest rate will increase.
• B)the long-term interest rate will remain the same.
• C)the long-term interest rate will decrease by more than the short-term rate.
• D)the long-term interest rate will decrease by the same amount as the short-term rate.
• E)the long-term interest rate will decrease,but by less than the short-term rate.

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Definitions:

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