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:

Account Receivable

Amounts owed to a company by customers for goods or services that have been delivered or used but not yet paid for.

Reportable Segments

These are operational segments of a business that have distinct financial data available, and whose results are regularly reviewed by the entity’s chief operating decision maker.

Profits Test

A criterion used to evaluate the profitability of a business or investment, often assessing whether revenues exceed costs or expenses to determine financial viability.

Assets Test

A financial measure used to determine eligibility for certain government benefits based on the value of one's assets.