Recession Can Cause Widespread Bank Crises for All of the Following

question 38

Multiple Choice

Recession can cause widespread bank crises for all of the following reasons except:

• A) there is less business investment as banks make fewer loans.
• B) borrowers' default rates increase.
• C) bank capital increases.
• D) the negative effect on banks' balance sheets.

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Definitions:

Depreciation Expense

Allocating the expense of a physical asset in a structured manner throughout its service life.

Double-Declining Balance Method

The Double-Declining Balance Method is an accelerated depreciation technique that doubles the rate of straight-line depreciation to allocate a asset's cost more quickly.

Activity Method

A depreciation technique that allocates the cost of an asset over its useful life based on its level of activity, such as units produced or hours used.

Sum-Of-The-Years'-Digits Method

A depreciation technique that accelerates the expense recognition, basing the calculation on a fraction of the sum of the years’ digits of the asset’s life.