In the Simple Deposit Expansion Model, If the Desired Reserve

question 88

Multiple Choice

In the simple deposit expansion model, if the desired reserve ratio is 20 percent and the Bank of Canada increases reserves by $100, chequable deposits can potentially expand by ________.

• A) $100
• B) $250
• C) $500
• D) $1000

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Definitions:

Herfindahl-Hirschman Index

A measure of market concentration used to determine the level of competition within industries.

Kinked Demand Curve

A perceived market demand curve that suggests prices will rapidly decrease if a firm raises its prices above those of its competitors, but will not increase significantly if the firm lowers prices.

Marginal Revenue

The additional income received from selling one more unit of a good or service, crucial for decision-making regarding output levels.

Average Cost

The cost per unit produced, computed by dividing the total of fixed and variable costs by the quantity of units produced, synonymous with average total cost.