If the Required Reserve Ratio in the Banking System Is

question 164

Multiple Choice

If the required reserve ratio in the banking system is 20% and the Fed buys $1,000 in U.S. bonds, what will happen to supply?

• A) It will increase by as much as $5,000.
• B) It will decrease by as much as $5,000.
• C) It will increase by as much as $10,000.
• D) It will decrease by as much as $10,000.
• E) It will remain unchanged.

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Definitions:

Average Cost Formula

A mathematical calculation used to determine the average cost per unit of inventory by dividing the total cost of goods by the total number of units available.

Ending Inventory

The total value of goods available for sale at the end of an accounting period, calculated by adding purchases to beginning inventory and subtracting cost of goods sold.

Perpetual Inventory System

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

Average Unit Cost

A costing method that calculates the cost per unit by dividing the total cost by the total number of units available for sale.