The interest rate at which businesses borrow to fund their investments is higher than the real interest rate for short-term, safe loans, because ________
A) business borrowers sometimes default on their loans
B) autonomous investment is not dependent on borrowed funds
C) the central bank controls the short-term, safe interest rate
D) the interest rate is negatively-related to business optimism
E) all of the above
A
You might also like to view...
Which of the following represents the general rule of hiring for a firm?
A) Total physical product equals marginal factor cost. B) Average revenue product equals the wage rate. C) Marginal cost equals marginal revenue. D) Marginal revenue product equals marginal factor cost.
An increase in the money supply:
a. raises the interest rate, causing an increase in investment and an increase in GDP. b. lowers the interest rate, causing an increase in investment and an increase in GDP. c. raises the interest rate, causing a decrease in investment and an increase in GDP. d. lowers the interest rate, causing a decrease in investment and an increase in GDP. e. lowers the interest rate, causing a decrease in investment and a decrease in GDP.
If a firm increases its output level in the short run, then
a. variable cost rises but fixed cost remains unchanged b. both variable cost and fixed cost rise c. variable cost rises, but fixed cost fall d. both variable cost and fixed cost fall e. variable cost remains unchanged, but fixed cost rises
The self-correcting property of the economy means that output gaps are eventually eliminated by:
A. increasing or decreasing potential output. B. government policy. C. decreasing inflation only. D. increasing or decreasing inflation.