Answer the Question on the Basis of the Following Information

question 100

Multiple Choice

Answer the question on the basis of the following information about a banking system: new currency deposited in the system = $40 billion;legal reserve ratio = 0.20;excess reserves prior to the currency deposit = $0. Refer to the information.The $40 billion deposit of currency into checking accounts will initially create:

• A) $8 billion of new checkable deposits.
• B) $10 billion of new checkable deposits.
• C) $40 billion of new checkable deposits.
• D) $200 billion of new checkable deposits.

---

Definitions:

Pure Competition

A market structure characterized by a large number of firms selling identical products, making it easy for entry and exit, and ensuring no single firm can influence market prices.

Many Sellers

A market condition characterized by the presence of numerous vendors, promoting competition and providing a wide range of options for consumers.

Similar Product

A product that serves the same purpose or functions in a similar manner to another product, often considered to be a competitor.

Oligopoly

A market structure characterized by a few firms dominating the industry, leading to limited competition.