On a Diagram Where the Interest Rate and the Quantity

question 29

Multiple Choice

On a diagram where the interest rate and the quantity of money demanded are shown on the vertical and horizontal axes respectively, the asset demand for money can be represented by

• A) a line parallel to the horizontal axis.
• B) a vertical line.
• C) a downsloping line or curve from left to right.
• D) an upsloping line or curve from left to right.

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Definitions:

Interest Rate

The amount charged by lenders to borrowers for the use of assets, expressed as a percentage of the principal.

ROE

Return on Equity (ROE) is a financial ratio that measures the profitability of a company in relation to the equity of its shareholders.

Operating Break-Even

The point at which a company's total revenues equal its total operating expenses, indicating no net profit or loss.

EBIT

Earnings Before Interest and Taxes; a company's profit before deducting interest expenses and income taxes.