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Question(s) / Instruction(s):

According to the expectations theory and the Fisher hypothesis, a downward-sloping term

Structure is indicative of which of the following based on market expectations?

I. nominal interest rates are expected to increase

II. Nominal interest rates are expected to decline

III. Inflation rates are expected to increase

IV. Inflation rates are expected to decrease

  1. I only
  2. II only
  3. IV only
  4. I and III only
  5. II and IV only

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