When the perceived financial risk falls in an economy, the:
A)lenders become more risk averse.
B)TED spread rises.
C)TED spread falls.
D)risk premiums rise.

Question

Quizplus · Accepted Answer

When the perceived financial risk falls in an economy, the TED spread falls. The TED (Treasury-Eurodollar) spread is the difference between the interest rates on interbank loans and short-term U.S. government debt. It is used as an indicator of perceived credit risk in the overall economy. A decrease in the TED spread indicates that investors and lenders have more confidence in borrowers, leading to lower perceived financial risk.

When the Perceived Financial Risk Falls in an Economy, The