The Interest Rate Thought to Have the Most Important Impact

question 10

Multiple Choice

The interest rate thought to have the most important impact on aggregate demand is the

• A)short-term interest rate.
• B)T-bill rate.
• C)rate on 90-day CDs.
• D)long-term interest rate.

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Definitions:

Coupon Rate

The interest rate stated on a bond when issued, which represents the percentage of interest to be paid to the bondholder.

Short-Term Interest Rates

Interest rates on loan or deposit instruments that have a maturity of one year or less, often serving as indicators of the overall direction of the economy.

Long-Term Rates

Long-term rates usually refer to interest rates or bond yields on long-term debt, indicating the cost or return on investments or loans that mature over a longer period.

Interest Rate Price Risk

The risk that an investment's value will change due to a fluctuation in the absolute level of interest rates.