Which of the Following Best Explains Why Consumption Expenditures Are

question 53

Multiple Choice

Which of the following best explains why consumption expenditures are affected by real interest rates?

• A)Higher real interest rates make it more expensive to finance the purchase of a new home.
• B)When interest rates are high, banks stop lending to households.
• C)An increase in real interest rates encourages people to save a larger proportion of their income, which means there is less income for consumption.
• D)When real interest rates are low, it is more difficult for households to borrow money because the supply of savings is low.
• E)When real interest rates are high, it is more difficult for households to borrow money because the supply of savings is low.

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Definitions:

Disbursements

Money paid out by a business or organization; expenses or amounts spent.

Petty Cash Fund

A small amount of cash kept on hand for making immediate payments for small, incidental expenses.

Small Expenditures

Minor or trivial expenses often incurred in the day-to-day operation of a business.

Merchandise

Products acquired for resale to customers in the course of business operations.