Which of the Following Describes the Relationship Between Interest Rates

question 177

Multiple Choice

Which of the following describes the relationship between interest rates and interest-sensitive goods, such as housing?

• A) As interest rates decline, the demand for interest-sensitive goods increases.
• B) As interest rates decline, the demand for interest-sensitive goods decreases.
• C) As interest rates increase, the demand for interest-sensitive goods increases, driving prices upward.
• D) As interest rates increase, the demand for interest-sensitive goods decreases, driving prices upward.

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Definitions:

Allowance for Doubtful Accounts

A contra-asset account used to estimate the portion of accounts receivable that is expected not to be collected.

Percentage-of-Receivables Basis

A method used in accounting to estimate the amount of accounts receivable that will not be collected by applying a percentage based on historical data.

Bad Debt Expense

A cost reported on the income statement, reflecting credit sales that are not expected to be collected.

Retailer

A business entity that sells goods or merchandise directly to consumers.