Question

Based on your understanding of the impact of macroeconomic factors, identify which of the following statements is true or false.

a. The larger the federal deficit, other things held constant, the higher are interest rates.
b. If the Fed injects a huge amount of money in the markets, inflation is expected to decline, and long-term interest rates are expected to rise.
c. In November 2008, the yields on U.S. Treasuries were actually negative. This means that investors were willing to lose money on their investment in U.S.
d. Treasuries as long as most of their invested capital was safe.
e. The Federal Reserve’s ability to use monetary policy to control economic activity in the United States is limited because U.S. interest rates are highly dependent on interest rates in other parts of the world.

Answer 1

Answer and Explanation:

1. True: money supply increase is inversely relayed to short term in5st rates which begin to fall

2. True: there is an increase in price of treasury securities here because of high demand of safe securities such as this. Therefore the interest which is constant is not equal increase in price

3. False: increase in interest will decrease money supply. money supply is increased to boost economy

4. True: other interest rates affect us interest rates