Which of the Following Statements Is TRUE

question 108

Multiple Choice

Which of the following statements is TRUE?

• A)Increases in the interest rate crowd out both consumption and investment spending,and this reduces the size of the multiplier.
• B)Increases in the interest rate crowd out both consumption and investment spending,and this increases the size of the multiplier.
• C)Increases in the interest rate have no effect on the size of the multiplier because higher interest rates cause consumption to increase,which offsets the crowding out of investment.
• D)Increases in the interest rate cause the size of the multiplier to be smaller if the economy is on the flat portion of the AS curve and to be larger if the economy is on the steep portion of the AS curve.

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Definitions:

Note Dated

Indicates the specific date on which a note payable, receivable, or other legal financial document becomes effective.

Promissory Note

A financial instrument that contains a written promise by one party to pay another party a definite sum of money either on demand or at a specified future date.

Accounts Receivable

Amounts owed to a business by its customers from sales or services rendered on credit that are expected to be collected in cash.

Notes Receivable

Financial assets representing amounts owed to the holder by individuals or entities, usually evidenced by formal instruments of credit.