Question: 1. What is an interest rate? Why do we observe a number of interest rates in the economy rather than a single interest rate? What

1. What is an interest rate? Why do we observe a number of interest rates in the economy rather than a single interest rate? What are some of the reasons interest rates vary? 2. What is the term structure of interest rates or yield curve? Explain some theories concerning the term structure of interest rates. What does each theory imply about the yield curve? Figure 1 Price Interest Rate KV D Bonds Loanable Funds

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