Scenario 11-1. The Monetary Policy of Namdian Is Determined by the Namdian

question 12

Multiple Choice

Scenario 11-1.
The monetary policy of Namdian is determined by the Namdian Central Bank. The local currency is the dia. Namdian banks collectively hold 100 million dias of required reserves, 25 million dias of excess reserves, 250 million dias of Namdian Treasury Bonds, and their customers hold 1,000 million dias of deposits. Namdians prefer to use only demand deposits and so the money supply consists of demand deposits.
-Refer to Scenario 11-1. Assume that banks desire to continue holding the same ratio of excess reserves to deposits. What is the reserve requirement and what is the reserve ratio?

• A) 2 percent, 8 percent
• B) 8 percent, 10 percent
• C) 10 percent, 12.5 percent
• D) None of the above is correct.

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Definitions:

Applied Overhead

The estimated amount of overhead costs assigned to individual units of production, based on a predetermined allocation rate.

Factory Overhead

Those manufacturing costs that are not directly tied to the production process but are necessary for production to occur, such as maintenance, utilities, and salaries of indirect labor.

Cost of Goods Sold

Direct costs attributable to the production of the goods sold by a company, including materials and labor.

Credit Balance

The amount of money that a financial institution owes to a customer in a particular account.