The Interest-Rate Effect

question 213

Multiple Choice

The interest-rate effect

• A)depends on the idea that increases in interest rates decrease the quantity of goods and services demanded.
• B)depends on the idea that increases in interest rates decrease the quantity of goods and services supplied.
• C)is responsible for the downward slope of the money-demand curve.
• D)is the least important reason, in the case of the United States, for the downward slope of the aggregate-demand curve.

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Definitions:

Prepayment

The act of paying for a good, service, or expense in advance before receiving or incurring it.

Adjusting Entry

A journal entry made at the end of an accounting period to allocate revenues and expenses to the period in which they actually occurred.

Economic Entity Assumption

An assumption that requires that the activities of the entity be kept separate and distinct from the activities of its owner and all other economic entities.

Economic Events

Activities or occurrences that have a significant financial impact on the businesses or the economy as a whole.