An Increase in the Interest Rate

question 21

Multiple Choice

An increase in the interest rate

• A)reduces planned investment but increases unplanned investment by increasing inventories.
• B)reduces planned investment as well as unexplained investment by reducing inventories.
• C)has no impact on planned investment because it is autonomous.
• D)changes inventories in a way that cannot be predicted.

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Definitions:

Deferred Gross Profit

The portion of gross profit on installment sales that is not recognized immediately but is deferred until cash is received.

Cost Recovery Method

An accounting method where profits are not recognized until all the costs of the goods sold are recovered.

Sales Price

The amount of money for which a product is sold to customers.

Transfer of Risks

The process in contracts where the risk of loss or damage to goods passes from the seller to the buyer.