Changes in the overnight interest rate usually result in
A)changes in both short-term and long-term interest rates with more of an effect on short-term interest rates.
B)changes in both short-term and long-term interest rates with more of an effect on long-term interest rates.
C)changes in both short-term and long-term interest rates with equal effect on both.
D)no change in both short-term and long-term interest rates.
E)changes in the short-term real interest rate but not the short-term nominal interest rate.

Question

Quizplus · Accepted Answer

Changes in the overnight interest rate usually have a more significant impact on short-term interest rates compared to long-term interest rates. This is because short-term rates are more influenced by the current economic condition and expectations for the future, which can change quickly based on policy changes. In contrast, long-term rates are more affected by the market's expectations for inflation and economic growth over a more extended period.

Changes in the Overnight Interest Rate Usually Result in