A Higher Interest Rate Will

question 27

Multiple Choice

A higher interest rate will:

• A)shift the consumption function upward.
• B)shift the consumption function downward.
• C)make the consumption function steeper.
• D)make the consumption function flatter.
• E)cause an upward movement along the consumption function.

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Definitions:

Financing Charges

Interest or other fees charged by a lender on the principal amount loaned, affecting the total cost of a loan.

Par Value

The face value of a bond or stock, as specified by the issuing company, which does not necessarily match the market value.

Dividends

Portions of a company's earnings distributed to shareholders, typically in cash or additional shares.

Retained Earnings

The portion of a company's profits not distributed to shareholders as dividends but instead reinvested in the business or used to pay off debt.