Other Things the Same, When the Interest Rate Rises

question 27

Multiple Choice

Other things the same, when the interest rate rises

• A) people would want to lend more, making the supply of loanable funds increase.
• B) people would want to lend less, making the supply of loanable funds decrease.
• C) people would want to lend more, making the quantity of loanable funds supplied increase.
• D) people would want to lend less, making the quantity of loanable funds supplied decrease.

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Definitions:

Incremental Revenue

The additional income generated from a new business activity or decision, compared to a baseline scenario.

Incremental Cost

The additional cost that is incurred when the production volume is increased by one unit.

Relevant Cost

Costs that should be considered when making decisions because they will be affected by the decision.

Incremental Analysis

The process of evaluating the financial consequences of making changes in business activities, by focusing on the costs and benefits that will change as a result.