Answer the Question on the Basis of the Information in the Following

question 202

Multiple Choice

Answer the question on the basis of the information in the following table. $\begin{array}{c}\begin{array}{c}\\\text {Money}\\\underline{\text { Supply}}\\ \$ 400 \\400\\400\\400\\400\end{array}\begin{array}{c}\\\text { Money }\\\underline{\text { Demanc }} \\ \$ 600 \\500 \\400 \\300 \\200\end{array}\begin{array}{c}\\\text { Interest}\\\underline{\text { Rate }} \\ 2 \% \\3 \\4 \\5 \\6\end{array}\begin{array}{c}\text {Investment }\\\text {(at Interest}\\\underline{\text { Rate Shown) }}\\\$ 700 \\600 \\500 \\300 \\200\end{array}\end{array}$
Refer to the table.An interest rate of 2 percent is not sustainable because:

• A) the demand for bonds in the bond market will fall and the interest rate will fall.
• B) the demand for bonds in the bond market will rise and the interest rate will fall.
• C) the supply of bonds in the bond market will decline and the interest rate will rise.
• D) the supply of bonds in the bond market will rise and the interest rate will rise.

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Definitions:

Initial Investments

Money utilized to start a business venture, purchase significant assets, or make investments to generate future income and profit.

Income Taxes

Taxes levied by the government on income generated by businesses and individuals within its jurisdiction.

After-Tax Discount Rate

The discount rate used in investment appraisal that takes into account the effects of taxes.

Income Tax Rate

The percentage at which individual or corporate income is taxed by the government, which can vary depending on the income level and jurisdiction.