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8. Macroeconomic factors that influence interest rate levels Apart from risk components, several macroeconomic factors-such as Federal Reserve (the Fed) policy, federal budget deficit or
8. Macroeconomic factors that influence interest rate levels Apart from risk components, several macroeconomic factors-such as Federal Reserve (the Fed) policy, federal budget deficit or surplus, international factors, and levels of business activity-influence interest rates. Based on your understanding of the impact of macroeconomic factors, identify which of the following statements are true or false: Statements True False The larger the federal deficit, other things held constant, the higher are interest rates. During the credit crisis of 2008, investors around the world were fearful about the collapse of real estate markets, shaky stock markets, and illiquidity of several securities in the United States and several other nations. The demand for U.S. Treasury bonds increased, which led to a rise in their price and a decline in their yields. Actions that lower short-term interest rates will always lower long-term interest rates. When the economy is weakening, the Fed is likely to decrease short-term interest rates. O
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