The Slope of the IS Curve Depends On

question 19

Multiple Choice

The slope of the IS curve depends on:

• A) the interest sensitivity of investment and the amount of government spending.
• B) the interest sensitivity of investment and the marginal propensity to consume.
• C) the interest sensitivity of investment and the tax rates.
• D) tax rates and government spending.

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Definitions:

Times Interest

A metric that evaluates a firm's capability to handle its debt responsibilities using its present earnings.

Equity Multiplier

A financial ratio that measures a company's use of debt financing by comparing total assets to shareholders' equity.

Working Capital

The difference between a company's current assets and current liabilities, indicating the available short-term assets to cover short-term debts.

Book Value

The value of an asset as recorded on the balance sheet, calculated as the cost of an asset minus accumulated depreciation.