An Increase in the Money Supply Can Typically Affect the Economy

question 195

Multiple Choice

An increase in the money supply can typically affect the economy with a lag of:

• A) 2 to 3 months.
• B) 4 to 10 months.
• C) 6 to 18 months.
• D) 10 to 24 months.

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Definitions:

Liberal Accounts Receivable Policy

A policy that involves offering lenient credit terms to customers, such as extended periods before payment is due, which can encourage sales but may increase the risk of bad debts.

Operating Cycle

The period it takes for a business to buy inventory, sell products, and collect cash from sales, reflecting the efficiency of a company’s operations.

Inventory Period

The average number of days that a company holds its inventory before selling it, indicating the efficiency of its inventory management.

Accounts Receivable Period

The average number of days it takes for a business to receive payments from its customers for goods or services sold on credit.