If the Reserve Ratio Is 10%, Then a $100 Increase

question 198

Multiple Choice

If the reserve ratio is 10%, then a $100 increase in bank deposits can potentially lead to:

• A) a decrease of $1,000 in the money supply.
• B) an increase of $1,000 in the money supply.
• C) a decrease of $90 in the money supply.
• D) an increase of $90 in the money supply.

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Definitions:

Direct Labor Hours

These hours represent the amount of time worked directly on the production of goods or services, used to allocate labor costs to products or services.

Departmental Overhead Method

A technique in accounting used to allocate overhead costs to specific departments based on relevant allocation bases such as direct labor hours or machine hours.

Volume-related Measures

Quantitative assessments related to the amount or size of something, especially used in the context of production and sales.

Overhead Costing Accuracy

The degree to which allocated overhead costs accurately represent the actual expenses incurred by the production process or specific products.