The Real Interest Rate Should Be Inversely Related to Investment

question 56

Multiple Choice

The real interest rate should be inversely related to investment in:

• A) plant and equipment, home building, and inventories.
• B) plant and equipment and home building, but not inventories.
• C) plant and equipment and inventories, but not home building.
• D) inventories and home building, but not plant and equipment.

---

Definitions:

Direct Materials Quantity Variance

This measures the difference between the actual quantity of materials used in production and the standard amount expected to be used.

Standard Costs

Pre-determined or estimated costs for products or services used for budgeting and performance evaluation purposes.

Actual Costs

The genuine costs incurred in the production or acquisition of goods and services.

Direct Materials Price Variance

The difference between the actual cost of direct materials and the standard cost, multiplied by the actual quantity purchased.