If the Interest Responsiveness of Business Firms Investment Is Great

question 20

Multiple Choice

If the interest responsiveness of business firms investment is great then the

• A)IS curve is flatter and the AD curve is flatter.
• B)IS curve is steeper and the AD curve is steeper.
• C)IS curve is horizontal and the AD curve is perfectly vertical.
• D)IS curve is horizontal and the AD curve is perfectly horizontal.

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Definitions:

Operating Activities

Day-to-day actions that relate directly to the production, sale, and delivery of a company’s products and services.

Depreciation Expense

An accounting method that allocates the cost of a tangible asset over its useful life, reflecting wear and tear or obsolescence.

Indirect Method

A way of preparing the cash flow statement where net income is adjusted for non-cash transactions, deferred incomes, and the change in working capital.

Direct Method

A way of presenting the cash flow statement where major classes of gross cash receipts and cash payments are disclosed, providing insight into specific cash flow activities.