As the economy moves through a business cycle, which of the following "term structure of interest rates" theories dominates the shape of the yield curve.
A) The expectations hypothesis.
B) The market segmentation theory.
C) The liquidity premium theory.
D) None of these theories dominate the shape of the yield curve.

Question

Quizplus · Accepted Answer

The shape of the yield curve is influenced by a combination of factors, and no single theory consistently dominates throughout all phases of the business cycle. The expectations hypothesis, market segmentation theory, and liquidity premium theory each provide insights under different conditions, but none can be said to universally dominate.

As the Economy Moves Through a Business Cycle, Which of the Following