An Increase in the Interest Rate Results in

question 34

Multiple Choice

An increase in the interest rate results in

• A)a smaller opportunity cost of investment and so planned investment spending increases.
• B)a smaller opportunity cost of investment and so planned investment spending decreases.
• C)a greater opportunity cost of investment and so planned investment spending decreases.
• D)a greater opportunity cost of investment and so planned investment spending increases.

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Definitions:

Deferred Tax

A tax obligation that a company owes in the future due to timing differences between its taxable income and its accounting earnings.

Accrued Expenses

Expenses that have been incurred but not yet paid or recorded, representing liabilities for services or goods received.

Tax Deductible

Expenses that can be subtracted from gross income to reduce the amount of income subject to tax, thereby lowering the tax liability.

Income Tax Rate

The percentage at which an individual or corporation is taxed on their income, which can vary based on the amount of income and the jurisdiction.