Stanmore Corporation Obtains from Southwell Manufacturing a Line of Credit

question 5

True/False

Stanmore Corporation obtains from Southwell Manufacturing a line of credit of $50,000 to help set up a new distribution center.   Stanmore initially uses $17,000 for purchase of inventory. Southwell only has a security interest in the inventory that covers that initial $17,000 advance.

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Definitions:

Money Supply

The total fund of money available in an economy at a fixed point in time.

Interest Rate

The cost of borrowing money, expressed as a percentage of the amount borrowed, paid by the borrower to the lender for the use of their funds.

Aggregate Demand

The comprehensive demand for every type of good and service within an economy, identified at a given price level and time period.

Investment

is the allocation of resources, usually money, in expectation of earning a future return.