Consumption Can Be Sensitive to Changes in the Real Interest

question 55

Multiple Choice

Consumption can be sensitive to changes in the real interest rate because:

• A) higher interest rates can increase the cost of durable goods like automobiles.
• B) higher interest rates will result in less saving.
• C) lower real interest rates will decrease spending on durable goods and increase spending on non-durable goods.
• D) lower interest rates increase savings.

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Definitions:

Variances

Differences between planned figures and actual performance or results, often analyzed in budgets and standard costing.

Production Costs

The total cost incurred by a company to manufacture a product or offer a service, including raw materials, labor, and overhead expenses.

Management

The method of strategizing, structuring, guiding, and managing resources to accomplish particular objectives.

Flexible Budgets

A financial plan that varies in response to changes in the amount of operations or activity.