According to the Expectations Theory, If the Market Believes That

Multiple Choice

According to the expectations theory, if the market believes that interest rates are likely to decrease in the near future,

A) borrowers would immediately increase their supply of short-term securities.
B) investors would immediately increase their demand for long-term securities.
C) borrowers would immediately increase their supply of long-term securities.
D) neither borrowers nor investors would do anything until the interest rates actually increase.
E) both a and b