Unfortunately, medium and long-term interest rates have much more influence on the rate of growth of the economy and on levels of unemployment than short-term interest rates do, because major new investment spending like research and development for new products or the construction of whole new factories are long-term projects that require long-term financing, and they are much less likely to be undertaken if long-term interest costs are high than if they are low.
[See also:
Federal Reserve System ,
money ,
money stock ,
inflation ,
interest rate ,
discount rate ,
reserve requirement ,
open market operations,
elasticity,
banking,
unemployment]
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