Which of the following is true?
A) Monetary policy influences long-term real interest rates more than short-term interest rates.
B) Short-term interest rates are primarily determined by real factors and the expected inflation.
C) A shift to a more expansionary monetary policy will tend to reduce short-term interest rates.
D) A shift to a more expansionary monetary policy will tend to reduce the expected rate of inflation in the future.

Question

Quizplus · Accepted Answer

When there is a shift to a more expansionary monetary policy, it typically involves an increase in the money supply and a decrease in interest rates. This reduction in interest rates tends to affect short-term rates more than longer-term rates. Therefore, choice A is incorrect. Choice B is incorrect because short-term interest rates are primarily influenced by monetary policy decisions made by central banks. Choice D is also incorrect because an expansionary monetary policy can lead to an increase in expected inflation, not a decrease. Therefore, the correct answer is C.

Which of the Following Is True