The Quantity of Loanable Funds Supplied Increases If the Real

question 62

Multiple Choice

The quantity of loanable funds supplied increases if the real interest rate rises, all other things remaining the same, because the

• A) real interest rate is the opportunity cost of saving.
• B) real interest rate is the opportunity cost of consumption.
• C) cost of living is determined by the real interest rate.
• D) real interest rate is inversely related to the cost of buying on credit.
• E) demand for investment increases when the real interest rate rises.

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Definitions:

Absorption Costing

A bookkeeping approach that encompasses the total expenses of production, including direct materials, direct labor, along with both variable and fixed overhead costs, into the pricing of a product.

Unit Product Cost

The total cost (both fixed and variable) to produce a unit of product, used for setting prices and analyzing efficiency.

Absorption Costing

An accounting method where all manufacturing costs, including both variable and fixed costs, are allocated to produced units, thus ‘absorbing’ them.

Unit Product Cost

The total cost associated with producing a single unit of a product, calculated by dividing the total production costs by the number of units produced.