If the Reserve Requirement Is 25%, Then a $1 Increase

question 115

Multiple Choice

If the reserve requirement is 25%, then a $1 increase in deposits means that the money supply

• A) will increase by $4.
• B) has the potential to increase by $4.
• C) will increase by $25.
• D) has the potential to increase by $25.

---

Definitions:

Unsold Goods

Unsold Goods are items that have been produced or acquired for sale by a business but have not yet been sold to consumers.

Inventory

The total value of all the raw materials, work-in-progress, and finished goods that a company holds at any given time.

LIFO Perpetual Inventory System

An inventory valuation method that assumes the last items added to inventory are the first sold, and records inventory changes perpetually.

Cost of Goods Sold

Financial obligations directly linked to the production of a company's saleable goods, covering material and labor costs.