Define the Concept of Cost Allocation

question 23

Essay

Define the concept of cost allocation. Can internal IT costs be viewed as an expense to business units? Why or why not?

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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.