One Problem with Using Discount Rate Changes to Influence Deposit

question 71

Multiple Choice

One problem with using discount rate changes to influence deposit creation or destruction is that

• A) small changes in the rate do not have much impact
• B) the discount rate changes are covert
• C) banks like to borrow from the Fed,and they will borrow even more after the changes
• D) the Fed must change the discount rate each time they meet
• E) banks do not have enough control over their demand deposits

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Definitions:

Predetermined Overhead Rate

A rate calculated at the beginning of a period by dividing estimated overhead costs by an estimated activity base, such as labor hours, used to allocate overhead costs to products.

Direct Labor-Hours

A measure of the total hours worked by employees directly involved in the manufacturing process, used as a base for allocating overhead costs.

Manufacturing Overhead

All indirect costs associated with the production process, such as utilities, rent, and salaries for administrative staff, not directly tied to the production of a specific product.

Predetermined Overhead Rate

A rate calculated before a period begins, used to allocate manufacturing overhead costs to products based on a chosen activity base, like labor hours or machine hours.