If an Automobile Maker Producing a Certain Kind of Car

question 14

Multiple Choice

If an automobile maker producing a certain kind of car suddenly experiences a decrease in the demand for the car. In the short run,

• A) the demand for steel goes down but the price of steel stays the same.
• B) the demand for steel goes up and the price of steel goes up by a lot.
• C) the demand for steel goes down and the price of steel goes down by a lot.
• D) the demand for steel goes up but the steel prices remain the same.

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Definitions:

Long-Term Equities

Investment securities that represent ownership in a company or corporation and are held for a period longer than one year.

Maturity Matching

A financial strategy that entails matching the duration of assets and liabilities to minimize risk associated with cash flow mismatches.

Project Duration

The total time required to complete a project from start to finish.

Financing Term

Conditions and duration under which money is borrowed or lent, including interest rate, repayment schedule, and other loan covenants.