Reference no: EM133077483

1. What should be the shape of a theoretical "normal" yield curve?

A. downward sloping decreasing at a decreasing rate

B. upward sloping Increasing at a decreasing rate

C. downward sloping decreasing at an increasing rate

D. a flat line

Question 2: In the context of the yield curve, what are the conditions that must hold for one to compare yields?

A.same credit quality only

B. same asset class and credit quality

C. same maturity

D. same asset class only.

Question 3

In the recent past, the US 3-month treasury bill yield was higher than the US 10 year treasury note yield. Which one of the following statements could best explain this phenomenon:

A. US 3-month treasury bill is indexed to inflation thus its yield is always higher than the US 10 year treasury note

B. US government debt has baloomed and to avoid default the market foresees lower interest rates in the future

C. The market always pushes the government to lower interest rates

D. The market foresees a significant slow down in economic growth prompting action to lower interest rates in the near future

Question 4

When looking at US treasury securities, which one is the best estimate of the real interest rate?

A. TIPS

B. 1-month treasury bill

C. 30 year treasury bond

D. 10 year treasury note

Question 5

If most public debt is indexed to inflation, what would happen to it if inflation rises steeply?

A. public debt would result in a budget surplus

B. public debt would remain the same

C. public debt would steeply rise

D. public debt would steeply fall

Question 6

Which one of the following statements is incorrect with respect to budget deficits?

Group of answer choices

A. Structural public deficit is what the budget deficit would be if the economy was operating at its potential (NAIRU)

B. During a recession, government experiences an increase in tax receipts

C.During a recession, cyclical component of the bud

D. During a recession, welfare payments tend to increase