According to Pure Expectations Theory, If Interest Rates Are Expected

question 43

Multiple Choice

According to pure expectations theory, if interest rates are expected to decrease, there will be ____ pressure on the demand for short-term funds by borrowers and ____ pressure on the demand for long-term funds issued by borrowers.

• A)upward; upward
• B)downward; downward
• C)upward; downward
• D)downward; upward

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Definitions:

Manufacturing Overhead

All manufacturing costs that are not directly tied to a specific product or production activity, including utilities, rent, and salaries for supervisors.

Adjusting Entry

A journal entry made at the end of an accounting period to allocate income and expenditure to the appropriate years.

Direct Materials Costs

The cost of raw materials directly used in the production of goods, which can be easily traced back to the finished product.

Predetermined Overhead Rate

The rate calculated before the period begins, used to allocate manufacturing overhead costs to individual units of production based on a consistent measure, such as direct labor hours.