A Decrease in Stock Prices Alters the Consumption Function By

question 56

Multiple Choice

A decrease in stock prices alters the consumption function by:

• A) increasing the mpc.
• B) decreasing the mpc.
• C) increasing the constant term.
• D) decreasing the constant term.

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Definitions:

Market Rates

Refers to the current interest rate or price available in the marketplace for financial instruments or commodities.

Floating-rate Debt

Floating-rate Debt refers to loans or bonds with a variable interest rate, which adjusts periodically based on a benchmark interest rate or index.

LIBOR

The London Interbank Offered Rate, which is a benchmark rate that some of the world’s leading banks charge each other for short-term loans.

Interest Expense

The cost incurred by an entity for borrowed funds over a period, including loans, bonds, or credit lines.