I'm having trouble distinguishing which of the interest rates, either nominal or real, central banks are...

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Economics

I'm having trouble distinguishing which of the interest rates,either nominal or real, central banks are able to control directly.Expanding on that, is there a difference between monetary policy'simpact on short and long-run interest rates? I understand thatmonetary policy can control short-run nominal interest rates, butis the same true for long-run nominal interest rates? Do centralbanks have any control over real interest rates or only nominal? Iam so confused.
Essentially, what are the differences between these four typesof interest rates:
1. Short-Run Nominal Interest Rates
2. Long-Run Nominal Interest Rates
3. Short-Run Real Interest Rates
4. Long-Run Real Interest Rates
And which are controlled by monetary policy?
If this seems all over the place and incomprehensible, then Iwould appreciate a general explanation of monetary policy withrespect to nominal and real interest rates if possible!

Answer & Explanation Solved by verified expert

4.0 Ratings (472 Votes)

Central banks can control nominal interest rate indirectly by by their impact on inflationCentral banks cannot directly set interest rate for loanssuch as personal loan mortgages etc A short term interest rate is the interest rate charged on short term loans and the long term interest rate is the interest rate charged on long term loansSo the difference See Answer

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