The business cycle has a significant impact on short-term interest rates.

Question

Quizplus · Accepted Answer

During periods of economic growth or expansion, short-term interest rates tend to increase in response to higher demand for lending and borrowing. Conversely, during periods of economic contraction or recession, short-term interest rates typically decrease as demand for credit weakens. Therefore, the business cycle has a direct impact on short-term interest rates.

The Business Cycle Has a Significant Impact on Short-Term Interest