the liquidity premium theory of term structure responses assumes that interest rates on the long-term bond respond to demand and supply conditions for that bond. assumes that interest rates on the long-term bond respond to demand and supply conditions for that bond. indicates that today's long-term interest rate equals the average of short-term interest rates that people expect to occur over the life of the long-term bond.

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07-10-2022
Business

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the liquidity premium theory of term structure responses assumes that interest rates on the long-term bond respond to demand and supply conditions for that bond. assumes that interest rates on the long-term bond respond to demand and supply conditions for that bond. indicates that today's long-term interest rate equals the average of short-term interest rates that people expect to occur over the life of the long-term bond.

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