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kmarks People Window Help xaAplia: Student Question ×eMindTap-Cengage Learning courses.aplia.com/af/servlet/quiz?quiz action-takeQuiz&quiz;_probGuid-QNAPCOA8010100000041ca26100b 1l 2018 Aaron Plantt Home Grades Personalized Reviews Discussion Course Materials Interest Rates Graded AssignmentI Read Chapter 61 Back to Assignment Due Sunday 06.17.18 at 11:45 Attempts 8. Macroeconomic factors that influence interest rate levels Apart from risk components, several macroeconomic factors-such as Federal Reserve (the Fed) policy, federal Keep the Highest: /4 Aa Aa 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 The larger the federal deficit, other things held constant, the higher are interest rates Long-term interest rates are not as sensitive to booms and recessions as are short-term interest rates. Actions that lower short-term interest rates will always lower long-term interest rates ?0 The Federal Reserve's ability to use monetary policy to control economic activity in the United O States is limited because u.S. interest rates are highly dependent on interest rates in other parts of the world. ? Continue without savExplanation / Answer
1) The Larger the federal deficit other things held constant the higher are interest rates - If there is federal deficit there is a gap in funding available there is more of spending than earning this leads to more borrowings which pushes the interest rates. Hence the above statement is True
2) Long Term interest rates are not as sensitive to booms and recessions as are short term interest rates - Short Term loans are generally for general and regular use which are taken too frequently as compared to long term loans, so a short term boom and recession will have more impact on short term interest rates - True
3) Actions that lower short term interest rates will always lower long term interest rates - This statement is not valid as there are different reasons for lowering short term interest rates which may not be applicable for longer term interest rates. Hence the statement is false
4)The federal Reserve's ability to use monetary policy to control economic activity in the United states is limited because U.S. interest rates are highly dependent on interest rates in other parts of the world - True. This is because US might borrow from different nations and dependent on the fiscal deficit and interest rates in those countries it might also impact interest rates in US
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