Question

The profit and cost effects allow us to:

	a.	Determine the discount rate of interest
	b.	Determine the fed funds rate of interest
	c.	Explain the size of the structural deficit
	d.	Explain the slope of the aggregate supply (AS) schedule

Answer 1

the interest rate and the federal funds rate determined by the central government based on the supply and demand conditions of the currency and that is the reason why the profit and cost is not related to it

Therefore (a,b) are wrong answers

the slope of aggregate supply curve is determined by the price level and the relevant supply and not profit and cost

Therefore (d) is wrong

Profit level or the revenue along with the cost level one can tell you about the deficit in the economy where if the revenue is more then there is no deficit and if there is high amount of cost than revenue then there is defecit and therefore

(C) is the answer to this question