The preferred habitat theory asserts that, to the extent that the demand and supply of funds in a given maturity range does not match, some lenders and borrowers will be induced to shift to maturities showing the opposite imbalances.

Question

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This is a correct statement about the preferred habitat theory, which suggests that investors and borrowers have certain preferences or "habitats" for different maturity ranges. If the supply or demand for funds in a given maturity range is not balanced, some participants may be motivated to move outside of their preferred habitats to find better opportunities or fill gaps in the market. This can help to bring the market back into equilibrium over time.

The Preferred Habitat Theory Asserts That, to the Extent That