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1) When lenders are fully aware of the effects of inflation and adjust interest rates to...

1) When lenders are fully aware of the effects of inflation and adjust interest rates to compensate for anticipated levels of price inflation, they are exemplifying the pattern of behavior known as Select one: A. complete illusion. B. adaptive lag. C. rational expectations. D. irrational exuberance.

2) The yield curve is considered to be normally shaped when it is Select one: A. upward sloping, with longer-term yields higher than shorter-term yields. B. downward sloping, with shorter-term yields higher than longer-term yields. C. humped, with intermediate yields being higher than shorter and longer yields. D. none of the above.

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Answer #1

1) Option c Rational Expectations is correct

2) Option a is correct .upward sloping, with longer-term yields higher than shorter-term yields.

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