The Economy Is More Efficient Because _____

question 52

Multiple Choice

The economy is more efficient because _____

• A) savers develop expertise in evaluating creditworthiness.
• B) banks develop expertise in structuring loans.
• C) borrowers develop expertise in enforcing loan contracts.
• D) banks reduce the transaction costs of channeling savings to creditworthy savers.
• E) banks increase the transaction costs of channeling savings to creditworthy borrowers.

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Definitions:

Match of Expenses

The accounting principle of recognizing expenses in the same period as the revenues they helped to generate.

Revising Depreciation Estimates

Adjusting the period or method used for depreciating a fixed asset due to changes in its expected useful life or salvage value.

Past Periods

Previous time frames or accounting periods, which have already concluded and for which financial statements are typically finalized.

Accelerated Depreciation Method

A depreciation method that provides for a higher depreciation amount in the first year of the asset’s use, followed by a gradually declining amount of depreciation.