23. If the interest rate on a loan a business is looking to take is lower than the expected return from an investment that business expects to make with that loan: a. a rational firm will take out a loan for the investment b. the Federal Reserve will conduct contractionary monetary policy c. a rational firm will not take out a loan for the investment. d. the Federal Reserve will conduct expansionary monetary policy. e. the government will conduct expansionary fiscal policy.

Exploring Economics
8th Edition
ISBN:9781544336329
Author:Robert L. Sexton
Publisher:Robert L. Sexton
Chapter27: Issues In Macroeconomic Theory And Policy
Section: Chapter Questions
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23. If the interest rate on a loan a business is looking to take is lower than the expected return from an
investment that business expects to make with that loan:
a. a rational firm will take out a loan for the investment
b. the Federal Reserve will conduct contractionary monetary policy
c. a rational firm will not take out a loan for the investment.
d. the Federal Reserve will conduct expansionary monetary policy.
e. the government will conduct expansionary fiscal policy.
Transcribed Image Text:23. If the interest rate on a loan a business is looking to take is lower than the expected return from an investment that business expects to make with that loan: a. a rational firm will take out a loan for the investment b. the Federal Reserve will conduct contractionary monetary policy c. a rational firm will not take out a loan for the investment. d. the Federal Reserve will conduct expansionary monetary policy. e. the government will conduct expansionary fiscal policy.
24. Even with the power to change interest rates, the Fed is unable to directly impact inflation, output or
unemployment. This is because:
a.
Interest rates do not affect inflation, output and unemployment
Interest rates have no influence on the economy
b.
c. Interest rates determine the opportunity cost of spending money today
Inflation, output and unemployment are fixed
d.
e. None of these
Transcribed Image Text:24. Even with the power to change interest rates, the Fed is unable to directly impact inflation, output or unemployment. This is because: a. Interest rates do not affect inflation, output and unemployment Interest rates have no influence on the economy b. c. Interest rates determine the opportunity cost of spending money today Inflation, output and unemployment are fixed d. e. None of these
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