How Does an Increase in the Interest Rate Affect the Demand

question 126

Multiple Choice

How does an increase in the interest rate affect the demand for goods and services?

• A) It increases the cost of borrowing and people consume more.
• B) It decreases the cost of borrowing and people consume more.
• C) It increases the cost of borrowing and people consume less.
• D) It decreases the cost of borrowing and people consume less.

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Definitions:

Statement of Cash Flows

This document details the combined amount of cash a business gains from its day-to-day operations and outside investments, and the cash it expends on operating and investing activities over a particular period.

Indirect Method

A method of calculating cash flows from operating activities in the cash flow statement by adjusting net income for changes in non-cash accounts.

Investing Activities

Transactions involving the purchase and sale of long-term assets and other investments not considered cash equivalents.