In which part of the business cycle is the Federal Reserve most likely to increase the discount rate to discourage banks from borrowing?
A) trough
B) expansion
C) peak
D) recession
E) depression
B) expansion
Explanation: B) During expansion, banks are discouraged from seeking loans from the Federal Reserve at higher discount rates, thereby slowing the addition of funds into the economy, which keeps the economy from expanding too rapidly.
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Which of the following are two components of the opportunity cost of using capital already owned by the firm?
A) economic profit and normal profit B) implicit rental rate and economic profit C) explicit rental rate and economic costs D) economic depreciation and forgone interest
Refer to the above figure. When the price in the market is $4, economic profits will equal
A) $100. B) $200. C) $300. D) $400.
Without contracts, what type of transactions would occur?
A) forward purchases. B) lateral purchases. C) spot transactions. D) side bars.
Darius lent Alejandro $1,000 for one year with the understanding that Alejandro would repay $1,070 . If the actual inflation rate was 7 percent, what was the real rate of interest Darius received?
a. 14 percent b. 7 percent c. 4 percent d. 0 percent e. -7 percent