Small Business Owners Get into Trouble When Determining Their Price

question 46

Multiple Choice

Small business owners get into trouble when determining their price floor when they:

• A)focus on what the customer will pay.
• B)assume their costs are the same as their competitors'.
• C)begin to track financial ratios to determine what they are doing.
• D)use the price floor as the minimum price in their acceptable price range.

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Definitions:

Required Reserve Ratio

The fraction of deposits that banks are mandated to keep as reserves by the central bank to ensure liquidity and stability in the financial system.

Money Multiplier

The multiple by which the money supply changes as a result of a change in fresh reserves in the banking system.

Money-Creation Process

The procedure through which the banking system generates money by issuing loans greater than the amount of reserves it holds.

M1

The measure of a country's money supply that includes physical currency and coin, demand deposits, traveler's checks, and other checkable deposits.