Apart from risk components, several macroeconomic factors—such as Federal Reserve (the Fed) policy, federal budget deficit...

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Economics

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 Countries with strong balance sheets and declining budget deficits tend to have lower interest rates. Actions that lower short-term interest rates will always lower long-term interest rates. During recessions, short-term interest rates decline more sharply than long-term interest rates. When the economy is weakening, the Fed is likely to decrease short-term interest rates.

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