According to Liquidity Preference Theory,an Increase in the Price Level

question 135

Multiple Choice

According to liquidity preference theory,an increase in the price level causes the interest rate to

• A)increase,which increases the quantity of goods and services demanded.
• B)increase,which decreases the quantity of goods and services demanded.
• C)decrease,which increases the quantity of goods and services demanded.
• D)decrease,which decreases the quantity of goods and services demanded.

---

Definitions:

Absorption Costing

A bookkeeping technique that encases the entirety of manufacturing expenses such as direct materials, direct labor, along with both variable and fixed overhead costs, in the product’s cost.

Divisional Segment Margin

A measure of the profitability of a specific division or segment within a company, usually calculated as the division's earnings before interest and taxes divided by its revenues.

Net Operating Income

A company's revenue minus its operating expenses, not including taxes and interest charges.

Common Fixed Expense

Costs that do not change with the level of production or sales within a certain range, and are shared across multiple departments or products.