Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

I didnt understand these multiple choice question Question 1 A positively sloped yield curve usually means the inflation rate is low. the inflation rate is

I didnt understand these multiple choice question

Question 1

A positively sloped yield curve usually means

  1. the inflation rate is low.
  2. the inflation rate is high.
  3. the inflation rate is decreasing.
  4. the inflation rate is increasing.
  5. real interest rates are increasing.

Question 2

If one year maturity interest rates are 2.5 percent, and two year maturity interest rates are 3 percent, one year interest rates are expected to

(a) fall by 1 percent over the next year.

(b)fall by 0.5 percent over the next year

(c) be unchanged over the next year.

(d) rise by 0.5 percent over the next year.

(e) rise by 1 percent over the next year.

Question 3

Japan has 1-year, 2-year, and 3-year interest rates at time t of 0.25%, 1%, and 1.25%.

Australia has 1-year, 2-year, and 3-year interest rates at time t of 1.5%, 2%, and 2.5%. Assuming expectations are forward looking and rational, which of the following is most likely?

  1. Short term interest rates in Japan are expected to fall, but short term interest rates in Australia are expected to rise.
  2. Short term interest rates in Japan are expected to rise, but short term interest rates in Australia are expected to fall.
  3. Australia probably has higher inflation than Japan, now and in the future.
  4. Japan probably has higher inflation than Australia, now and in the future.
  5. One year rates in Australia at time t+1 are expected to be 3 percent.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Exploring Economics

Authors: Robert L Sexton

5th Edition

978-1439040249, 1439040249

More Books

Students also viewed these Economics questions

Question

Population

Answered: 1 week ago

Question

The feeling of boredom.

Answered: 1 week ago