The Federal Reserve has more impact on interest rates:
A) in the long run than in the short run.
B) when banks have a lot of excess reserve than when banks have zero excess reserve.
C) when they are falling than when they are rising.
D) in the short run than in the long run.

Question

Quizplus · Accepted Answer

The Federal Reserve has a more direct and immediate impact on short-term interest rates through its policy actions, such as setting the federal funds rate. Over the long run, other factors like economic growth, inflation, and global financial conditions play a larger role in determining interest rates.

The Federal Reserve Has More Impact on Interest Rates