Question

Macroeconomic factors that influence interest rate levels Aa 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: Foreign investments fuel growth in a country. However, this investment is based on factors that affect the business environment and increase riskiness, such as macroeconomic policies, political changes, labor issues, tax rates, and regulations.

Answer 1

Answer:

Answer explained below

Explanation:

A ) FALSE

When the economy is weakening, the fed decreases the short term interest rates so that money supply in the economy increases.

B ) TRUE

Since change in short term interest rates have effect on economy very quickly as compare to long term interest rates.

C ) TRUE

Increase in money supply will results in falling of interest rates.

D ) TRUE

Due to decrease in short term interest rates money supply in the economy will increases and the economy will become strong.