An attempt by the Fed to stimulate the economy by reducing short-term interest rates may have a limited effect if long-term interest rates remain unaffected.

Question

Quizplus · Accepted Answer

The effectiveness of the Federal Reserve's attempt to stimulate the economy by reducing short-term interest rates can be limited if long-term interest rates do not also decrease. This is because long-term rates often influence borrowing costs for investments and large purchases more directly, affecting consumer and business spending decisions.

An Attempt by the Fed to Stimulate the Economy by Reducing