As Interest Rates Decline, All of the Following Will Result

question 115

Multiple Choice

As interest rates decline, all of the following will result except

• A) Quantity demanded of loanable funds increases.
• B) Quantity supplied of loanable funds decreases.
• C) Cost of borrowing diminishes.
• D) Demand curve for money shifts to the left.

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Definitions:

Present Value Factor

A factor used to calculate the present value of a future amount of money or stream of cash flows given a specific rate of return.

Straight-Line Depreciation

A process of dividing the expense of a substantial asset into identical annual portions over its useful duration.

Net Income

The net income of a firm after deducting all expenses and taxes from its gross revenue.

Cash Payback Period

A rephrased term for Payback Period, this is the duration required for an investment to generate cash flows that cover its initial expense.