What is the Herfindahl index and how is it calculated?
What will be an ideal response?
The Heyerdahl index is a way to measure market concentration that takes into account the size of market shares held by firms. It measures the sum of the squared market shares of each firm in the industry. It gives a greater weight to firms with large market shares. A high Heyerdahl index number indicates a high degree of concentration in one or two firms. A lower index might mean that the top four firms have rather equal shares of the market. For example, if there were only one firm in the industry, the Heyerdahl index would be 10,000 (100 squared). If four firms in an industry each had a 25% share, the index would be 2500 (252? 4 = 2500). A high index might be where one firm has 85% of the industry and the others have 5% each for a total of 7225 + (52? 3) = 7300.
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The velocity of money in circulation measures: a. the average length of time that people hold wealth
b. how fast aggregate spending will increase for a given decline in money demand. c. how fast inflation will rise for a given increase in the money supply. d. how quickly money changes hands. e. how quickly banks can create money.
Which of the following would lead to a decrease in the money supply?
a. Banks decide to use excess reserves to purchase corporate bonds. b. The Fed decreases the discount rate. c. The Fed decreases the required reserve ratio. d. The Fed sells government bonds. e. The Fed purchases government bonds.