If the Money Multiplier Is 3 and the Fed Wants

question 88

Multiple Choice

If the money multiplier is 3 and the Fed wants to increase the money supply by $900,000, it could

• A)buy $300,000 worth of bonds.
• B)buy $225,000 worth of bonds.
• C)sell $300,000 worth of bonds.
• D)sell $225,000 worth of bonds.

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Definitions:

Cost Of Merchandise Sold

The cost that is reported as an expense when merchandise is sold.

Gross Profit

The difference between sales revenue and the cost of goods sold, indicating the basic profitability of a company's core business activities.

Perpetual Inventory System

An accounting method that records the sale or purchase of inventory immediately through the use of computerized point-of-sale systems and enterprise asset management.

LIFO

"Last In, First Out," an inventory valuation method where the latest goods purchased are the first to be sold.