Assume There Are No Excess Reserves in the Banking System

question 72

Multiple Choice

Assume there are no excess reserves in the banking system when the reserve requirement is 20%.The purchase by the Fed of $10,000 in U.S.government securities from Academy National Bank has the potential of ultimately increasing the money supply by a total of

• A)$2,000
• B)$8,000
• C)$10,000
• D)$20,000
• E)$50,000

---

Definitions:

Herfindahl Index

A measure of market concentration that sums the squares of the market share percentages of all firms within the industry, used to assess the level of competition.

Oligopolistic

Pertains to a market structure characterized by a small number of firms dominating the market, leading to limited competition and significant control over market prices.

Equal Percentage

A concept referring to an identical rate of change or proportionate adjustment applied across different quantities or values.

Five-Firm Industry

A market structure characterized by the dominance of the top five firms, often used as a concentration ratio to measure market competitiveness.