Which of the Following Is Associated with an Increase in the Discount

question 31

Multiple Choice

Which of the following is associated with an increase in the discount rate?

• A) It will increase the present value of future cash flows.
• B) It will have no effect on net present value.
• C) It will reduce the present value of future cash flows.
• D) It is one method of compensating for reduced risk.

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Definitions:

Inflationary Gap

A situation where the total demand for goods and services exceeds the total supply at current prices, leading to upward pressure on prices and inflation.

Full Employment GDP

The level of gross domestic product achieved when the economy is fully employing all available labor and resources, maximizing output.

Aggregate Supply

The aggregate amount of products and services that companies in an economy intend to sell over a particular time frame.

Deficit

A financial situation where expenses exceed income or imports exceed exports.