short-term interest rates and long-term interest rates usually move together; this is the major deficiency of the expectations theory.
The amount of interest due each period expressed as a percentage of the amount lent, deposited, or borrowed is known as an interest rate. The total interest on a loaned or borrowed sum is determined by the principal amount, the interest rate, the frequency of compounding, and the period of time the loan, deposit, or borrowing took place. The interest rate over a year is known as the annual interest rate. Other interest rates are applicable over shorter time frames, such a day or a month, but they are typically annualised. The nominal interest rate, the effective interest rate, and the real interest rate are the three primary categories of interest rates. The declared rate on which interest payments are computed is known as the nominal interest on an investment or loan.
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