Short-term interest rates generally fluctuate ______ long-term rates, so it pays to monitor interest rate movements, shop around for the best rates, and place your funds in savings vehicles consistent with your needs.
Click on the arrows to vote for the correct answer
A. B. C. D.A
The correct answer is B. Less than.
Short-term interest rates, also known as the federal funds rate, are set by the Federal Reserve to control the money supply and influence economic growth. Long-term interest rates, on the other hand, are determined by market forces and are affected by factors such as inflation expectations, economic growth, and investor demand for fixed-income securities.
In general, short-term interest rates are more sensitive to changes in the economy and monetary policy than long-term rates. When the Federal Reserve raises or lowers short-term rates, it can have a significant impact on borrowing costs, consumer spending, and business investment. This, in turn, can affect economic growth and inflation expectations.
Long-term rates, on the other hand, are influenced by a variety of factors and are less sensitive to changes in monetary policy. For example, if investors expect inflation to rise, they may demand higher yields on long-term bonds to compensate for the erosion of purchasing power. Similarly, if the economy is growing quickly, investors may demand higher yields on long-term bonds to compensate for the potential for higher inflation and interest rates in the future.
Therefore, it pays to monitor interest rate movements, shop around for the best rates, and place your funds in savings vehicles consistent with your needs, as short-term interest rates are generally more volatile and subject to change than long-term rates.