If a Bank Has Already Lent Money at Fixed Interest

question 107

Multiple Choice

If a bank has already lent money at fixed interest rates,then during a period of higher-than-expected inflation,it experiences

• A)Negative real income effects.
• B)Hyperinflation.
• C)Rising real interest rates.
• D)Deflation.

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Definitions:

Consolidated Retained Earnings

The portion of net earnings not paid out as dividends, but retained by the company to reinvest in its core business, or to pay debt, reported in the consolidated financial statements.

Subsidiary's Adjusted Income

The net income of a subsidiary company after making adjustments for fair value measurements, currency translation, and other accounting policies.

Dividends

Payments made by a corporation to its shareholder members, distributing a portion of the company's earnings.

Notes Payable

A written promise to pay a specified sum of money, usually with interest, by a certain date, classified as a liability on the balance sheet.