What is an indicator of the extent of risk in financial systems?
A)the difference between the unemployment rate and the natural rate of unemployment
B)falling commodity prices
C)the spread between the monthly LIBOR rate and U.S.T-bill yield
D)the spread between inflation-indexed and nonindexed U.S.bonds
E)the number of banks applying for federal assistance

Question

Quizplus · Accepted Answer

The spread between the monthly LIBOR rate (which reflects the estimated interest rate that banks charge to lend to each other) and U.S. T-bill yield (which reflects the interest rate on short-term government debt) is an indicator of the extent of risk in financial systems. A widening spread indicates that banks are becoming more hesitant to lend to each other, which can signal underlying problems in the financial system.

Answer: D
 The spread between inflation-indexed and non-indexed U.S. bonds is another indicator of the extent of risk in financial systems. If the spread is widening, it indicates that investors are demanding higher compensation for the risk of inflation, which could be a sign of uncertainty or concern about the economy or financial markets.

What Is an Indicator of the Extent of Risk in Financial