Desired Level of the Capital Stock

question 30

Multiple Choice

Desired Level of the Capital Stock
-Consider the two graphs above.Suppose that firms are able to use inventories as collateral for low-interest loans.This would ________ the desired level of inventories,as depicted in graph ________.

• A)increase;B
• B)increase;A
• C)decrease;B
• D)decrease;A

---

Definitions:

Commercial Paper

Short-term, unsecured promissory notes, issued by companies, typically used for the financing of accounts receivable, inventories, and meeting short-term liabilities.

Mortgages

Loans specifically created for purchasing real estate, secured by the property itself, which is to be repaid along with interest over a predetermined period.

Mortgage-backed CDOs

Collateralized debt obligations that are secured by mortgage-backed securities as the underlying assets.

Asset

An economic resource that is expected to provide benefits to the owner in future periods.