The Fed Is Reluctant to Change the Required Reserve Rate

question 74

Multiple Choice

 The Fed is reluctant to change the required reserve rate because: ?

• A) changes in the rate have a small impact on the actual quantity of money.?
• B) the money multiplier is not impacted by the required reserve rate.?
• C) the time lag between changing the required reserve rate and changes in the money supply can be too long.?
• D) small changes in the required reserve rate can have too big of an impact on the money multiplier and the level of deposits.

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Definitions:

Herfindahl Index

A measure of market concentration used to determine the amount of competition among firms within an industry.

Market Shares

The share of sales within an industry attributed to a certain company.

Herfindahl Index

An indicator used to measure the size of firms in relation to the industry and an index of market concentration.

Barriers to Entry

Factors that prevent or hinder new firms from entering an industry, including high startup costs and regulatory restrictions.