Suppose Banks Decide to Hold More Excess Reserves Relative to Deposits

question 133

Multiple Choice

Suppose banks decide to hold more excess reserves relative to deposits. Other things the same, this action will cause the money supply to

• A)fall.To reduce the impact of this the Fed could sell Treasury bonds.
• B)fall.To reduce the impact of this the Fed could buy Treasury bonds.
• C)rise.To reduce the impact of this the Fed could sell Treasury bonds.
• D)rise.To reduce the impact of this the Fed could buy Treasury bonds.

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Definitions:

Concentration Ratios

Concentration ratios are measures that indicate the extent of market control by the largest firms within an industry, reflecting the degree of market competition.

High Concentration

A situation in a market where a small number of firms hold a large market share, often leading to reduced competition.

Herfindahl-Hirschman Index

A measure used to evaluate the level of competition within an industry, calculated by squaring the market share of each firm within the industry and then summing the resulting numbers.

Concentration Ratio

A measure used to assess the degree of market concentration by looking at the market share of the largest firms within the industry.