Question

1. The Average Propensity to Consume:

C/Y

C/Yd

delC/delYd

delC/Y

2.MPS+MPC+APS+APC =

1

2

No way of knowing

0

3. A budget surplus is when

T>G

Then budget is balanced

G>T

T=G

4.Who sets the required reserve ratio?

The required portion of assets that must be kept by banks

The required portion of money that must be kept by banks

The required portion of loans that must be kept by banks

The required portion of deposits that must be kept by banks

5. Fiscal Policy:

lncludes changes in taxes or government spending

Is always effective

Can include raising interest rates and buying bonds

Is conducted by the FED

Answer 1

Ans 1: C/Y is the correct formula for Average Propensity to consume.

Ans 2: 2 (because MPC + MPS = 1 and APS + APC =1 , so 1+1 = 2)

Ans 3: T>G (When tax revenue is more than government spending, then budget surplus will be there)

Ans 4: The required portion of deposits that must be kept by banks (The banks keep some portion of depoists with themselves as reserves and can use rest of the deposits to make loans and reserve ratio is set by the central bank of the country).

Ans 5: lncludes changes in taxes or government spending (It is conducted by the government and related to taxes and government spending).