Why can't the expectations hypothesis stand alone as an adequate theory to explain yield curves?
What will be an ideal response?
The expectations hypothesis does a good job of explaining why interest rates of different maturities move together and for explaining why short-term rates are more volatile than long- term rates. What it cannot do is explain why yield curves usually are upward sloping. To use only expectations hypothesis implies that investors usually expect short-term interest rates to rise, which certainly is not the case.
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Other things held constant, higher saving rates lead to
A) increases in the number of hours workers work. B) decreases in real per capita GDP. C) a lower standard of living. D) higher living standards.
Refer to Figure 9.8. In order to eliminate international trade in sugar altogether, this country would have to impose a tariff of
A) $25. B) $50. C) $75. D) $150. E) $175.