Because the Nominal Interest Rate Is Always Positive, the Discount

question 44

Multiple Choice

Because the nominal interest rate is always positive, the discount factor is always:

• A) zero.
• B) one.
• C) negative.
• D) greater than one.
• E) less than one.

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Definitions:

Competitive Market

A competitive market is one where there are many buyers and sellers, so no single participant has significant power to dictate the price of goods or services.

Long Run

A period of time in which all factors of production and costs are variable, allowing for full adjustment to changes.

Profit-Maximizing Firms

Businesses that operate with the primary goal of maximizing their profit, which is achieved by increasing income while minimizing costs.

Economic Factors

The various external factors, such as inflation, interest rates, and unemployment, that influence the performance of the economy.