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. badeiw 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 E) Your p ible to tell what is happening to your purchasing power without further information. B You purdhasing Power illii be inflation has no effect on purchasing power.

Explanation / Answer

21. Correct option: (c)

Reason: Discount rate is the interest rate charged by Fed for giving out loans to other banks.

22. Correct option: (d)

Reason: M1 is the most liquid form of money supply

23. Correct option: (b)

Reason: Sellers will reduce supply today, so as to sell tomorrow at higher prices

24. Correct option: (c)

Reason: Purchasing power has decreased because inflation is higher than pay rise

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