Lowering the Discount Rate Is

question 60

Multiple Choice

Lowering the discount rate is

• A) a contractionary policy stance because the cost of borrowing funds falls, thereby encouraging consumption and investment spending.
• B) a contractionary policy because it reduces banks' profit margins by lowering the return on lending.
• C) an expansionary policy stance because consumers and businesses can now borrow funds directly from the Fed at a lower cost, thereby encouraging private spending.
• D) an expansionary policy stance because it will be less costly for banks to borrow funds and this puts downward pressure on interest rates in the economy.

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Definitions:

Depreciation

The method in accounting of distributing a physical asset's cost throughout its service life.

FIFO Method

First-In, First-Out method is an inventory valuation approach where goods purchased or produced first are sold or used first.

LIFO Cost

LIFO (Last In, First Out) Cost refers to an inventory valuation method where the most recently acquired items are the first to be sold or used, affecting the cost of goods sold and inventory valuation.

Net Income

The amount of money left over after all operating expenses, taxes, and interest are subtracted from total revenue.