If a Firm Can Borrow or Lend at a 10

question 30

Multiple Choice

If a firm can borrow or lend at a 10 percent annual interest rate, it will

• A)buy all units of capital with a marginal rate of return above 10 percent
• B)buy all units of capital with an average rate of return above 10 percent
• C)buy all units of capital with a marginal rate of return below 10 percent
• D)buy all units of capital with an average rate of return below 10 percent
• E)select only the unit of capital with the highest marginal rate of return, assuming it is above 10 percent

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Definitions:

Persistent Inflation

Sustained increase in the general price level of goods and services in an economy over a period of time.

Excessive Government Spending

The situation where government expenditures significantly exceed revenue, leading to budget deficits and potential economic issues.

Quantity of Money

The total amount of money available in an economy at a specific time, including currency, coins, and balances in bank accounts.

Rate of Growth

The percentage change in a variable, such as economic output, population, or investment, over a specified period, indicating how quickly it is increasing or decreasing.