When We Assume That the Supply of Money Is a Variable

question 72

Multiple Choice

When we assume that the supply of money is a variable that the central bank controls,we

• A)must then assume as well that the demand for money is not influenced by the value of money.
• B)must then assume as well that the price level is unrelated to the value of money.
• C)are ignoring the fact that,in the real world,households are also suppliers of money.
• D)are ignoring the complications introduced by the role of the banking system.

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Definitions:

Budgeted

Relates to the financial plan that estimates future revenue and expenses over a specific time period.

Denominator Level

In cost accounting, it refers to the total amount of allocation base (e.g., direct labor hours, machine hours) that is used to calculate the predetermined overhead rate.

Standard Cost System

A cost accounting method that assigns expected costs to products to help in setting budgets and analyzing cost variances.

Volume Variance

The variance that arises whenever the standard hours allowed for the actual output of a period are different from the denominator activity level that was used to compute the predetermined overhead rate. It is computed by multiplying the fixed component of the predetermined overhead rate by the difference between the denominator hours and the standard hours allowed for the actual output.