If the South African Reserve Bank tightens the money supply, other things held constant, short-term interest rates will be pushed upward, and this increase probably will be greater than the increase in rates in the long-term market.

Question

Quizplus · Accepted Answer

When the money supply is tightened, short-term interest rates are directly impacted and will likely increase more than long-term rates due to the shorter maturity of these securities. This is known as a steepening of the yield curve.

If the South African Reserve Bank Tightens the Money Supply