Changes in the Federal Funds Rate ________

question 40

Multiple Choice

Changes in the federal funds rate ________.

• A) have no effect on the long-term expected interest rate
• B) change the long-term expected interest rates in the same direction
• C) change the long-term expected interest rates in the opposite direction
• D) can change the long-term expected interest rate in any direction, depending on the magnitude of the change in the federal funds rate

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Definitions:

Demand Curve

A graph showing the relationship between the price of a good and the quantity of the good demanded, typically downward sloping, indicating that demand increases as price decreases.

Monopolistically Competitive

A market structure in which many firms sell products that are similar but not identical, allowing for product differentiation.

Perfectly Competitive

Describes a market structure where many firms offer homogeneous products, and no single buyer or seller can influence the market price.

Long-Run Equilibrium

A state in an economy or market where all factors of production are fully employed and economic forces are in balance, persisting over a long period.