Explain the concept of “lender of last resort.” What is discount rate?
What will be an ideal response?
When risky business prospects make commercial banks hesitant to extend new loans, or when banks are in trouble, the Fed will step in by lending money to the banks, thus inducing them to lend more to their customers. Mammoth amounts of central bank lending to commercial banks helped keep the financial system functioning and ease the panic, as seen in 2007, 2008, and 2009.The discount rate is the interest rate the Fed charges on loans that it makes to banks. Federal Reserve officials can try to influence the amount banks borrow by manipulating the discount rate. If the Fed wants banks to have more reserves, it can reduce the interest rate that it charges on loans, thereby tempting banks to borrow more. Alternatively, it can soak up reserves by raising its rate and persuading the banks to reduce their borrowings.
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A contract may remain incomplete because the expected benefits of greater completeness do not cover the costs of drafting it
Indicate whether the statement is true or false
Entry continues as long as
A) economic profits are zero. B) accounting profits are positive. C) accounting profits are positive and economic profits are negative. D) economic profits are positive.
Which statement shows consumer expectation affecting demand?
a. Mikayla buys a new skirt style that she saw in a fashion magazine. b. Jacob's wages go up, so he buys an extra pair of basketball shoes. c. The price of fuel containing ethanol drops, so gasoline sales decrease. d. Emma buys 10 pounds of coffee because crops are failing in Kenya.
A fall in the price of capital goods will shift the aggregate:
a. Supply curve leftward b. Demand curve leftward c. Supply curve rightward d. Demand curve rightward