When the Interest Rate in the United States Increases as a Result

question 206

Multiple Choice

When the interest rate in the United States increases as a result of contractionary monetary policy, investment spending _____ and consumption _____ .

• A) increases; increases
• B) increases; decreases
• C) decreases; increases
• D) decreases; decreases

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Definitions:

Investee's Net Income

The total profit of a company in which another company has an investment interest, after all expenses and taxes have been subtracted.

Original Cost

The initial amount of money spent to acquire an asset, including purchase price and all expenses incurred to bring it to its intended use.

Unrealized Gain

A profit that exists on paper as a result of an investment increasing in value but has not yet been sold for cash.

Available-for-Sale Investments

Securities that are not classified as held-to-maturity or trading securities and can be sold in the short-term or kept for long-term holdings, with unrealized gains or losses reported in other comprehensive income.