Question
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
- the inflation rate is low.
- the inflation rate is high.
- the inflation rate is decreasing.
- the inflation rate is increasing.
- 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?
- Short term interest rates in Japan are expected to fall, but short term interest rates in Australia are expected to rise.
- Short term interest rates in Japan are expected to rise, but short term interest rates in Australia are expected to fall.
- Australia probably has higher inflation than Japan, now and in the future.
- Japan probably has higher inflation than Australia, now and in the future.
- One year rates in Australia at time t+1 are expected to be 3 percent.
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