Use the Following to Answer Questions

question 223

Multiple Choice

Use the following to answer questions:
Figure: Short-Run Determination of the Interest Rate
-(Figure: Short-Run Determination of the Interest Rate) Look at the figure Short-Run Determination of the Interest Rate. If the money supply is at MS₁ and the central bank buys Treasury bills, then the resulting short-run shift in the supply of savings (loanable funds) may be represented by a shift of the:

• A)money supply curve to MS₂, which raises the interest rate.
• B)supply of loanable funds from S₁ to S₂, which lowers the interest rate.
• C)supply of loanable funds from S₂ to S₁, which raises the interest rate.
• D)interest rate from r₂ to r₁.

---

Definitions:

Aging Schedule

A table that shows the breakdown of accounts receivable into categories based on the length of time they have been outstanding.

Credit Policy

A credit policy is the set of guidelines that a company follows to determine the creditworthiness of customers and the terms of credit to offer.

Cash Balances

The amount of cash or cash equivalents that a company or an individual holds.

Compensating Balances

Minimum balances that a business must maintain in its bank account as part of a borrowing arrangement with the bank.