12 #8

Attempts Keep the Highest / 1 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. O O When the economy is weakening, the Fed is likely to increase short-term interest rates. O During recessions, short-term interest rates decline more sharply than long-term interest rates. O The Federal Reserve's ability to use monetary policy to control economic activity in the United States is limited because US interest rates are highly dependent on interest rates in other parts of the world. O oo