The theory suggesting that for any given issuer, long-term interest rates tends to be higher than short-term rates is called

Question

Quizplus · Accepted Answer

The theory stating that long-term rates tend to be higher than short-term rates due to the preference of investors for liquidity is called liquidity preference theory. The expectation hypothesis suggests that long-term rates are determined by the market's expectations of future short-term rates, while market segmentation theory posits that different segments of the market have different supply and demand factors that determine interest rates. None of these theories fit the description given in the question except for liquidity preference theory.

The Theory Suggesting That for Any Given Issuer, Long-Term Interest