If the Real Interest Rate Is Less Than the Marginal

question 45

Multiple Choice

If the real interest rate is less than the marginal product of capital,firms are better off:

• A)producing at a loss.
• B)saving their earnings in an economywide financial market.
• C)accumulating more inventory.
• D)borrowing in financial markets and buying more capital.
• E)none of the above

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Definitions:

Company Deposit

Funds placed into a financial institution by a company for safekeeping or to earn interest.

Deposits in Transit

Funds that have been sent to a bank but have not yet been recorded in the bank's records and thus do not appear in the bank balance.

Book Balance

The balance of an account according to the accounting records, not necessarily reflecting the available cash or cleared funds.

Bank Balance

The total amount of funds available in a bank account at a given moment, including all deposits and subtracting any withdrawals.