The multiplier is reduced by an income tax because an income tax reduces the fraction of each dollar of GDP that consumers actually receive and spend.

A bank has $250 in checking deposits, $1,000 in savings deposits, $1,200 in time deposits, $1,000 in loans to businesses, $400 in outstanding credit card balances, $800 in government securities, $25 in currency in its vault, and $25 in deposits at

the Fed. Of these, ________ are part of M2. A) $2,600 B) $2,450 C) $3,450 D) $2,850 E) $2,200

Safe drivers buying "accident forgiveness" insurance tend to

a. Become even safer drivers b. Engage in more risky driving c. Engage in less risky driving d. Not change their driving patterns