Which interest rate is most relevant in determining aggregate expenditures?
A) federal funds rate
B) short-term real interest rate
C) long-term nominal interest rate
D) long-term real interest rate

Question

Quizplus · Accepted Answer

The long-term real interest rate is the most relevant in determining aggregate expenditures as it represents the cost of borrowing over a longer period of time and adjusts for inflation. This impacts investment, which is a component of aggregate expenditures. The federal funds rate, short-term real interest rate, and long-term nominal interest rate may also impact aggregate expenditures, but to a lesser extent.

Which Interest Rate Is Most Relevant in Determining Aggregate Expenditures