21. The discount rate is the rate at which: A. Consumers can take out personal l

Question

21. The discount rate is the rate at which: A. Consumers can take out personal loans from a bank B. The interest rate that credit card companies charge cardholders conom The rate at which banks can make overnight loans from the federal reserve The rate which borrowers with the best credit rating get on a home mortgage D. 22. MI includes: A. checking accounts (demand deposits) B. currency and coin held in our pockets traveler's checks D. All of the above 23. Which best describes the incentives that expected inflation provides to sellerssuppliers in the economy? A) Sellers will want to accept the offer from the lowest bidder. B) Sellers will sell less now and wait until prices stabilize before making more purchases. C) Sellers will wait for the offer from the highest bidder. D) Sellers will wait until prices fall before selling again. 24" You receive a 4% pay raise this year, at the same time, inflation rises by 6 % this year: A) Your purchasing power has increased. B) It is imposs C) Your purchasing power has declined D) Your purchasing power is unaffected by either inflation or the pay raise because they are expressed in nominal, and not real, terms ible to tell what is happening to your purchasing power without further information. E) Your purchasing poweri is sill ising because inflation has no effect on purchasing power

Explanation / Answer

21> c

Reason

The discount rate is the interest rate charged to commercial banks and other depository institutions for loans received from the Federal Reserve's discount window.

22> D

Reason

M1 is a metric for the money supply of a country and includes physical money as well as checking accounts, demand deposits and negotiable order of withdrawal (NOW) accounts.

23> C

Reason

In the period of expected inflation, the sellers will get lower price as it is expected by the suppliers and not bidders, so they will wait for the highest bidder,

24> C

Reason

My nominal income rise is less than the rise in the price level, thus there is a fall in the real income, thus we will have a less purchasing price.

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