Other Things Constant, an Increase in the Real Interest Rate

question 166

Multiple Choice

Other things constant, an increase in the real interest rate will

• A) cause consumers to reduce their purchases of durable items like appliances and automobiles.
• B) induce businesses to increase their level of investment.
• C) make borrowing money more attractive.
• D) increase the natural rate of unemployment.

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Definitions:

Investment

Allocation of resources, usually money, into a vehicle expected to generate income or profit, such as stocks, bonds, or real estate.

Return on Investment

A measure of the financial gain or profitability of an investment relative to its cost, expressed as a percentage.

Accounts Payable Turnover Ratio

A financial metric that measures how quickly a business pays its suppliers; calculated as cost of goods sold divided by average accounts payable.

Vendors

Entities or individuals that supply goods or services to another company, often playing a crucial role in the supply chain.