Which One of the Following Statements Is Correct

question 68

Multiple Choice

Which one of the following statements is correct?

• A)Seasonal needs are financed externally when firms adhere to a flexible financing policy.
• B)A flexible financing policy tends to increase the risk of encountering financial distress.
• C)Long-term interest rates tend to be less volatile than short-term rates.
• D)Most firms tend to finance inventory with long-term debt.
• E)Short-term interest rates are generally higher than long-term rates.

---

Definitions:

Contractionary Influence

Economic policies or conditions intended to reduce the size of the economy by decreasing the money supply or government expenditures, typically to combat inflation.

Expansionary Influence

Activities or policies designed to stimulate economic growth or expansion, often through increased spending or tax cuts.

Discretionary Influence

The ability to make decisions or take actions based on personal judgment rather than fixed rules.

Public Borrowing

The process by which a government finances its expenditure by raising loans through the issuance of securities or borrowing from financial institutions.