Changes in the federal funds rate ________.
A) have no effect on the long-term expected interest rate
B) change the long-term expected interest rates in the same direction
C) change the long-term expected interest rates in the opposite direction
D) can change the long-term expected interest rate in any direction, depending on the magnitude of the change in the federal funds rate

Question

Quizplus · Accepted Answer

Changes in the federal funds rate typically influence the direction of long-term expected interest rates in the same direction. For example, if the federal funds rate increases, it generally leads to an increase in long-term interest rates, reflecting expectations of tighter monetary policy affecting the economy over time.

Changes in the Federal Funds Rate ________