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Question
According to the expectations theory, if the market believes that interest rates are likely to decrease in the near future,a. borrowers would immediately increase their supply of short-term securities.
b. investors would immediately increase their demand for long-term securities.
c. borrowers would immediately increase their supply of long-term securities.
d. neither borrowers nor investors would do anything until the interest rates actually increase.
e. both a and b
Answer
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