A Commercial Bank Can Add to Its Actual Reserves by

question 400

Multiple Choice

A commercial bank can add to its actual reserves by

• A) lending money to bank customers.
• B) buying government securities from the public.
• C) buying government securities from a Federal Reserve Bank.
• D) borrowing from a Federal Reserve Bank.

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Definitions:

Absorption Costing

A costing approach that encompasses all costs associated with production, namely direct materials, direct labor, and both variable and fixed overheads, in the product's final cost.

Variable Costing

An accounting method that only includes variable costs - costs that fluctuate with production volume - in the calculation of unit cost.

Fixed Costs

Expenses that do not change with the level of production or sales over a short period, such as rent or salaries.

Direct Materials

The raw materials that are directly traceable to the manufacturing of a product.