Other Things Being Equal, What Is the Effect of Deficit

question 29

Multiple Choice

Other things being equal, what is the effect of deficit spending on credit markets?

• A) Both the demand for credit and the supply of credit will increase.
• B) Both the demand for credit and the supply of credit will decrease.
• C) The demand for credit increases while the supply of credit remains constant.
• D) The supply of credit will increase while the demand for credit remains the same.

Familiarize with basic concepts and definitions in accounting including assets, liabilities, and owner's equity.

Identify ethical considerations in financial accounting on an international scale.

Grasp the types of business organizations and their commonality across different countries.

Understand the concept of present value and how it is affected by interest rates and time.

---

Definitions:

Convertible Bond

A bond that offers the option to be exchanged for a specific quantity of the issuing company's stock at chosen intervals throughout its tenure, generally at the choice of the person holding the bond.

Call Option

A financial contract giving the buyer the right, but not the obligation, to buy an asset at a specified price within a certain period.

Common Stock

Equity ownership in a corporation, giving holders voting rights and a residual claim on corporate earnings via dividends.

Option's Value

The intrinsic and time value associated with an options contract, determining its worth on the market.