Over the next three years, the expected path of one-year interest rates is 4, 1, and 1 percent. the expectations theory of the term structure predicts that the current interest rate on three-year bond is (a) 1 percent(b) 2 percent(c) 3 percent(d) 4 percent.

Suppose the production function in an economy is y = k0.5l0.5, where k is the amount of capital and l is the amount of labor. the economy begins with 64 units of capital and 16 units of labor. use a calculator and equations in the chapter to find a numerical answer to each of the following questions. what are the wage and the rental price of capital? the wage is equal to unit(s) of output and the rental price of capital is equal to unit(s) of output.