8. Macroeconomic factors that influence interest rate levelsApart from risk components, several macroeconomic factors—such as Federal Reserve (the Fed) policy, federal budget deficit or surplus, international factors, and levels of business activity—influence interest rates.Based on your understanding of the impact of macroeconomic factors, identify which of the following statements are true or false:StatementsTrueFalseWhen the Fed increases the money supply, short-term interest rates tend to decline. Actions that lower short-term interest rates will always lower long-term interest rates. Long-term interest rates are not as sensitive to booms and recessions as are short-term interest rates. The Federal Reserve’s ability to use monetary policy to control economic activity in the United States is limited because US interest rates are highly dependent on interest rates in other parts of the world.

1] When the Fed increases the money supply, short-term interest rates tend to decline.True: An…

Answered: 8. Macroeconomic factors that influence…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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8. Macroeconomic factors that influence interest rate levels

Apart from risk components, several macroeconomic factors—such as Federal Reserve (the Fed) policy, federal budget deficit or surplus, international factors, and levels of business activity—influence interest rates.

Based on your understanding of the impact of macroeconomic factors, identify which of the following statements are true or false:

Statements	True	False
When the Fed increases the money supply, short-term interest rates tend to decline.
Actions that lower short-term interest rates will always lower long-term interest rates.
Long-term interest rates are not as sensitive to booms and recessions as are short-term interest rates.
The Federal Reserve’s ability to use monetary policy to control economic activity in the United States is limited because US interest rates are highly dependent on interest rates in other parts of the world.

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