The Price of a Loanable Fund Is Greater Than the Return

question 27

Multiple Choice

The price of a loanable fund is greater than the return on capital.It follows that firms will

• A) not borrow funds and eventually the capital stock will decrease and the return on capital will rise.
• B) borrow funds and, as a result, the capital stock will rise.
• C) not borrow funds and eventually the capital stock will increase and the return on capital will rise.
• D) borrow funds and, as a result, the price of credit will rise.
• E) none of the above

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Definitions:

Direct Labor-Hours

The aggregate of hours spent by staff members who are directly engaged in producing merchandise or rendering a service.

Job-Order Costing

A cost accounting system that assigns costs to specific production batches or jobs, making it suitable for customized orders.

Predetermined Overhead Rate

An estimated rate used to allocate manufacturing overhead costs to individual products or job orders, based on a particular activity base.

Machine-Hours

A measure of production time used in cost accounting, representing the number of hours that machinery is in operation during a given period.