When the Discount Rate Is Increased

question 38

Multiple Choice

When the discount rate is increased,

• A) there is more money for banks to lend.
• B) there is an increase in the overall money supply.
• C) there is increased economic activity.
• D) there is an economic slowdown.
• E) the banks will pay less interest to borrow from the Federal Reserve Bank.

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Definitions:

Straight-Line Depreciation

A method of allocating the cost of a tangible asset over its useful life in equal annual amounts.

Net Income Attributable

The portion of net income (profit) that is available to the shareholders, after accounting for dividends to preferred stockholders and other adjustments.

Noncontrolling Interest

A stake in a company that is less than 50%, implying that the holder does not have control over the company's operations.

Equity Method

The equity method is an accounting technique used to record investments in associate companies where the investor has significant influence but does not control the company outright, typically identified by owning 20-50% of the voting stock.