Which of the Following Statements Is Incorrect

question 106

Multiple Choice

Which of the following statements is incorrect?

• A)It is common for companies to retire bonds and also issue new bonds in the same year as a way to replace higher interest rate debt with lower interest rate issuances.
• B)The cash payment of interest is reported as a cash flow from operating activities.
• C)Retiring bonds by paying cash creates a cash flow from investing activities when the issuing company buys the bonds back from investors.
• D)The cash payment to call an outstanding bond issue is reported as a cash flow from financing activities.

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Definitions:

Income

Money received, especially on a regular basis, by an individual or business in exchange for providing labor, goods, or services, or through investing.

MPC (Marginal Propensity to Consume)

The proportion of an increase in income that is spent on consumption rather than being saved.

Government Purchases Multiplier

The ratio of change in aggregate economic output to a change in government spending, used to analyze the effect of fiscal policy on the economy.

Aggregate Demand

Total economic need for all goods and services within an economy, pegged at a designated price level during a chosen period.