The Effect of an Error Resulting in an Understatement of Ending

question 42

Multiple Choice

The effect of an error resulting in an understatement of ending inventory is to:

• A)overstate the next period's beginning inventory.
• B)understate cost of goods sold of the current period.
• C)overstate cost of goods sold of the current period.
• D)overstate operating expenses of the current period.

---

Definitions:

Money Supply

The total quantity of money available within an economy, including cash, coins, and balances held in bank accounts.

Classical Dichotomy

The theoretical separation of real and nominal variables in classical economics, implying that economic variables can be distinctively divided into those that are related to quantity and those related to price.

Money Neutrality

The concept that changes in the money supply only affect nominal variables in the economy, such as prices, wages, and exchange rates, but not real variables like employment or real GDP.

Money Supply

The money supply is the total amount of money—cash, coins, and balances in bank accounts—in circulation within an economy at a specific time.