An Increase in the Real Interest Rate Will

question 135

Multiple Choice

An increase in the real interest rate will:

• A)cause consumers to spend more and save less.
• B)most likely lower consumer purchases of durable goods.
• C)most likely lower the reward to savings.
• D)most likely lower the cost of borrowing.

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Definitions:

Required Rate

The minimum rate of return that an investment or project must offer to be considered viable or attractive.

Operating Assets

Assets used in the daily operations of a business to generate revenue, such as plant, equipment, inventory, and receivables.

Residual Income

The income that an entity generates after accounting for the cost of capital, showing what is effectively left over for shareholders.

Centralized Organizations

Organizations where decision-making authority is concentrated at the top levels of management, with lower levels primarily responsible for implementing decisions.