The success of Fed intervention depends on how well
A)Congress performs when manipulating the money supply.
B)Individuals respond to the Fed's direct requests of the public.
C)The Treasury follows the Fed's directions for releasing money.
D)Changes in long-term interest rates closely follow changes in short-term interest rates.

Question

Quizplus · Accepted Answer

The success of Federal Reserve (Fed) interventions often hinges on the relationship between short-term and long-term interest rates. When the Fed adjusts short-term rates, it aims to influence the broader economy, including long-term rates. If changes in short-term rates are closely mirrored by changes in long-term rates, the Fed's policy moves are more likely to have the intended economic impact.

The Success of Fed Intervention Depends on How Well