The Increased Spread Between Three-Month LIBOR and Three-Month Bond Yields

Multiple Choice

The increased spread between three-month LIBOR and three-month bond yields led to ________. This is a classic example of ________.

A) reduced lending; a liquidity crisis
B) a rush to buy bonds; an asset bubble
C) falling risk in financial markets; risk sharing
D) increased inflationary expectations; cost-push inflation
E) increased consumer expenditure; the monetary transmission mechanism