Monetary policy (Cont.)

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]