Which of the following statements is correct?
A)Long-term interest rates are generally higher than short-term interest rates.
B)Stock market investors are positively affected when inflation rises.
C)The degree of inflation risk is higher for short-term lending.
D)During times of high inflation, interest rates on new loans for cars, homes, and credit cards fall.

Question

Quizplus · Accepted Answer

Long-term interest rates are generally higher than short-term interest rates due to the increased risk associated with longer-term investments.

Answer: B is incorrect. Stock market investors are negatively affected when inflation rises because it can lead to higher interest rates and lower corporate profits.

Answer: C is partially correct. Short-term lending does have a higher degree of inflation risk due to the shorter maturity of the investment, but long-term lending is also impacted by inflation.

Answer: D is incorrect. During times of high inflation, interest rates on new loans for cars, homes, and credit cards typically rise to reflect the increased inflation risk.

Which of the Following Statements Is Correct