\What are the marginal propensity to consume (MPC) and the marginal propensity to save (MPS)? How is the MPC related to the consumption function?
The marginal propensity to consume is the change in consumption divided by the change in disposable income. The marginal propensity to save is the change in saving divided by the change in disposable income. The MPC measures the slope of the consumption function and is constant along a linear consumption function.
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Which of the following is not included in M2?
A) Money market mutual funds held by individuals B) Money market deposit accounts C) Money market mutual funds held by institutions D) Small-denomination time deposits
Suppose that in Mysore, the reserve—deposit ratio is
res = 0.5 - 2 i, where i is the nominal interest rate. The currency—deposit ratio is 0.2 and the monetary base equals 100. The real quantity of money demanded is given by the money demand function L(Y, i) = 0.5Y - 10i, where Y is real output. Currently, the real interest rate is 5% and the economy expects an inflation rate of 5%. The money multiplier equals A) 2.00. B) 2.40. C) 3.00. D) 4.00.