A) Which of the following would be most likely to lead to a higher level of interest rates in the economy?

a. Households start saving a larger percentage of their income.

b. Corporations step up their expansion plans and thus increase their demand for capital.

c. The level of inflation begins to decline.

d. The economy moves from a boom to a recession.

e. The Federal Reserve decides to try to stimulate the economy.

B) Because the maturity risk premium is normally positive, the yield curve is normally _________________.

a. upward sloping

b. downward sloping

c. flat

d. parabolic