The _________ theory that has been developed to explain the shape of the yield curve suggests that the curve should normally be upward sloping, because, everything else equal, an upward sloping curve implies that lenders prefer to lend short-term funds at lower rates than they lend long-term funds.
A)liquidity preference
B)expectations
C)market segmentation
D)open market
E)reinvestment

Question

The _________ theory that has been developed to explain the shape of the yield curve suggests that the curve should normally be upward sloping, because, everything else equal, an upward sloping curve implies that lenders prefer to lend short-term funds at lower rates than they lend long-term funds. 
A)liquidity preference
B)expectations
C)market segmentation
D)open market
E)reinvestment

Quizplus · Accepted Answer

The liquidity preference theory explains that lenders prefer to lend short-term funds at lower rates than they lend long-term funds, which results in an upward sloping yield curve.

The _________ Theory That Has Been Developed to Explain the Shape