What is the risk-free interest rate?
What will be an ideal response?
The risk-free rate of return is the term often used for the rate of return on short-term government bonds. Since these bonds are essentially risk free, the rate of return earned on the bonds represents compensation for only the time preference.
This interest rate, however, is not determined solely by investors’ time preference. The Federal Reserve has the ability to raise and lower the rate as it sees fit through sales and purchases of bonds (also known as open market operations).
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In equilibrium, the quantity of labor demanded is ________ the quantity of labor supplied
A) less than B) equal to C) greater than D) the primary determinant of
Building infrastructure is left to the government since ________
A) the cost of such projects would not be economical for any individual firm B) borrowing costs make such projects prohibitively expensive C) inflation tends to erode the real value of debt D) a natural monopoly would result if this activity were undertaken by an individual private firm