Which of the Following Is NOT True of the Interest

question 75

Multiple Choice

Which of the following is NOT true of the interest rate channel?

• A) Bank loans play no special role.
• B) The Fed changes the real interest rate which affects the components of aggregate expenditure.
• C) Borrowers are indifferent as to how and from whom they raise funds.
• D) Alternative sources of funds are not substitutes for each other.

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Definitions:

Interest Expense

The sum an entity is liable for as a result of borrowing funds over a particular period.

Unearned Revenues

This reflects money received by a company for goods or services yet to be provided.

Retained Earnings

The portion of net income that is kept within the company rather than distributed to its shareholders as dividends.

Prepaid Rent

Payments made in advance for rent on a property or space that is to be used in the future, recorded as an asset on the balance sheet until the period to which the payment applies passes.