A rise in short-term interest rates that is believed to be only temporary
A)is likely to have a significant effect on long-term interest rates.
B)will have a bigger impact on long-term interest rates than if the rise in short-term rates had been permanent.
C)is likely to have only a small impact on long-term interest rates.
D)cannot possibly affect long-term interest rates.

Question

Quizplus · Accepted Answer

A rise in short-term interest rates that is believed to be temporary is not expected to have a significant impact on long-term interest rates. Long-term interest rates are affected more by inflation expectations, economic growth, and global economic conditions, rather than short-term interest rates that are only expected to be temporary. Therefore, the impact on long-term rates is likely to be small.

A Rise in Short-Term Interest Rates That Is Believed to Be