The Equilibrium Interest Rate

question 202

Multiple Choice

The equilibrium interest rate

• A)affects both the size of total output and its composition.
• B)falls when the demand for loanable funds increases.
• C)determines the composition of R&D spending but not its total amount.
• D)increases when the expected rate of return on R&D spending falls.

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Definitions:

Owner's Capital

The amount of equity a business owner has invested in the business minus any withdrawals made from the business by the owner.

Cash Balance

The amount of cash a company has available, reflecting the total amount of cash and cash equivalents at a given point in time.

General Ledger

A full catalog of all economic activities a company has engaged in from its inception, systematically arranged by accounts.

Cash Account

An account that records all cash transactions, including receipts and payments, reflecting the company's liquidity status.