As Interest Rates Rise the Supply of Loans May Decrease

question 24

Multiple Choice

As interest rates rise the supply of loans may decrease because:

• A)Borrowers net worth rises
• B)Demand for loans falls
• C)Lenders are increasingly on the lookout for adverse selection
• D)All of the answers given are correct

---

Definitions:

Deferred Expenses

Costs that are incurred but not expensed immediately and are carried on the balance sheet as an asset until recognized.

Current Assets

Assets that are expected to be converted into cash, sold, or consumed within one year or within the normal operating cycle of the business.

Accrued Taxes Payable

Liabilities for taxes that have been incurred but not yet paid.

Current Liability

A company's obligations or debts that are due to be paid to creditors within one year.