When the Fed reduces the discount rate, it is more likely that the economy experiences _________ and the fall in the rate will _____________
a. inflation; decrease the use of open market operations
b. inflation; decrease the federal funds rate as well
c. recession; increase the federal funds rate as well
d. recession; decrease the cost to banks of borrowing from the Fed
e. inflation; decrease the cost to banks of borrowing from the Fed
D
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Luigi is willing to lend Klaus $5,000 for one year at a nominal rate of interest of 7%. Both Luigi and Klaus expect the rate of inflation to be 2% in the next year. How many dollars will Klaus have to pay Luigi in one year?
A. $350 B. $5,000 C. $5,350 D. $4,650
Refer to the table above. What is the total cost of producing 145 units of the good?
A) $90 B) $180 C) $190 D) $210
What takes place in the indirect finance market?
A) Corporate and government bonds are sold to savers. B) Government purchases of buildings and equipment are sold to the highest bidder. C) Part ownership of corporations is sold in the form of stocks. D) Deposits of savers are accepted and lent to borrowers.
Why do firms engage in the activity of production?
A. to acquire profits B. to help society advance technologically C. to develop a supply schedule D. to participate in the circular flow