When the Flow of Money Is Tight, the Price of Short-Term

question 72

Multiple Choice

When the flow of money is tight, the price of short-term loans will be bid ________ and the federal fund rate (FFR) will ________.

• A) up; rise
• B) down; rise
• C) up; fall
• D) down; fall
• E) up in good economic times and down in difficult economic times; vary
• Depending on market forces

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Definitions:

Break-even Point

The point at which total costs equal total revenues, indicating that a business is neither making a profit nor a loss.

Fixed Costs

Costs that do not change in total with changes in activity level over a relevant range, such as rents, salaries, and insurance premiums.

Break-even Sales

The amount of revenue needed to cover all fixed and variable costs, resulting in zero profit or loss.

Fixed Costs

Expenses that do not change with the level of goods or services produced by a business.