Author Question: Which of the following best explains why the long-term interest rate will generally change by less ... (Read 43 times)

SO00 · **on:** Jun 30, 2018

Which of the following best explains why the long-term interest rate will generally change by less than 1 when the short-term interest rate changes by 1?

A) The mathematical calculations are more difficult for analysts in the case of long-term bonds.
B) Long-term rates are always lower than short-term rates, so there is less room for them to change.
C) Financial market participants will not expect this increase in the short-term interest rate to persist fully in the future.
D) Financial markets are often affected by bubbles and fads.
E) none of the above

Question 2

For this question, assume that individuals hold both currency and checkable deposits. The money multiplier is equal to

A) 1/c.
B) 1/c + (1 - c).
C) c + (1 - c).
D) 1/.
E) 1/(1-c)