1. Assume the economy is at point A. Which of the following is true? 2. When the
ID: 1139372 • Letter: 1
Question
1. Assume the economy is at point A. Which of the following is true?
2. When the business cycle has hit bottom and is about to enter a period of sustained economic expansion, to maximize his gains the prescient investor should:
Borrow money to buy real assets.
3. Which of the following does not correctly complete the statement? A sharp and protracted recession will generally cause:
Nominal interest rates will be high, and by the time the economy gets to point B, the real interest rate (on a fixed rate loan obtained at point A) will be even higher. Real GDP TimeExplanation / Answer
Q.1 Option 3. As the economy would be growing from point A to B and the interest rate would be lower for the loan on fixed rate
Q.2 Option 4. As the economy is going to recover, the investor can borrow money to buy real assets which would appreciate in the near future
Q.3 Option 2. Because of sharp recession which is termed as depression would lead to reduced investments leading to reduction in values of assets
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