If the Money Multiplier Is 4, What Is the Reserve

question 139

Multiple Choice

If the money multiplier is 4, what is the reserve requirement?

• A) 4%
• B) 10%
• C) 25%
• D) 40%

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Definitions:

Periodic Inventory System

A periodic inventory system is an accounting method where inventory levels and cost of goods sold are determined at specific periods, such as monthly or annually, through a physical count.

Cost of Goods Sold

Cost of Goods Sold (COGS) represents the direct costs attributable to the production of goods sold by a company, including material and labor costs.

Stockholders' Equity

The residual interest in the assets of a corporation that remains after deducting its liabilities, representing ownership equity.

Net Income

The amount of money a firm earns after deducting all its expenses, taxes, and costs from its total revenue, indicating its profitability during a specific period.