A Higher Interest Rate Will

question 27

Multiple Choice

A higher interest rate will:

• A)shift the consumption function upward.
• B)shift the consumption function downward.
• C)make the consumption function steeper.
• D)make the consumption function flatter.
• E)cause an upward movement along the consumption function.

---

Definitions:

Compounded Annually

Refers to the process of calculating and adding interest to the principal amount of an investment or loan once per year.

Incremental Borrowing Rate

The interest rate a lessee would have to pay to borrow funds over a similar term, and with a similar security, to lease a comparable asset.

Balance Sheet

A financial statement that provides a snapshot of a company’s financial position at a particular point in time, showing assets, liabilities, and shareholders' equity.

Liability Reported

The documentation in financial accounting of any debts or financial obligations a company is responsible for.