The benchmark default-free interest rate of the financial system is generally considered to be:
A) the federal funds rate
B) the interest rate on the 10-year Treasury note
C) the discount rate
D) the 30-year fixed rate mortgage
B
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How does expansionary monetary policy affect a nation's exchange rate?
What will be an ideal response?
Suppose that last year you borrowed $100 at 5 percent interest to purchase a $100 pair of Nike cross-training shoes. This year you repaid the bank with interest. If the inflation rate was 10 percent last year, your purchase of the shoes would:
a. make you an inflation winner as you saved $5 on the shoes. b. make you an inflation loser as you paid $5 more than you should have for the shoes. c. not be affected at all by the inflation rate. d. be taxed according to COLA adjustments. e. make you an inflation loser because of bracket creep.