According to Liquidity-Preference Theory, How Does a Decrease in the Price

question 115

Multiple Choice

According to liquidity-preference theory, how does a decrease in the price level affect the interest rate and output demanded, respectively?

• A) The interest rate increases, and output demanded increases.
• B) The interest rate increases, and output demanded decreases.
• C) The interest rate decreases, and output demanded increases.
• D) The interest rate decreases, and output demanded decreases.

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Definitions:

Product Margin

The difference between the selling price of a product and the cost of goods sold (COGS), indicating the profit per unit sold.

Direct Labor Cost

The total amount of wages paid to employees who are directly involved in the manufacturing or production process.

Meeting With Clients

A business activity where representatives of a company interact with its clients to discuss services, products, or ongoing projects.

Activity Cost Pools

Groupings of individual costs based on the activities that cause the company to incur these costs, used in activity-based costing.