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If Ben's MPC is.80 this means he will

spend 80% of his increase in income

The immediate determinants of investment spending are the

rate of return and real interest rate

The multiplier may be calculated as

change in RGDP by initial change in spending

If net exports decrease from zero to some negative amount, the aggregate expenditure schedule would shift


A recessionary gap is

potential-actual GDP

The foreign purchases effect suggest that a decrease in the US price level relative to other countries will

decrease imports and increase exports

An increase in aggregate demand in the vertical range of AS curve will

increase price level

Discretionary fiscal policy refers to

change in taxes and government expenditures

A tax reduction of a specific amount will be more expansionary the

larger the MPC

If the economy is encountering inflation, supply-side economists might recommend

wage and price controls

Checkable deposits are classified as money because

they are used in buying goods and paying debts

The asset demand for money

varies inversely with market rate of interest

The primary purpose of the legal reserve requirement

monetary authorities monitor bank's spending

Excess reserves refer to the

actual-required reserves

When commercial banks use excess reserves to buy government securities

new money is created

If the reserve ration was lowered

the money multiplier would increase

The three main tools of monetary policy are

discout rate, reserve ratio, open market operations

Which of the following will happen when the Federal Reserve buys bonds from the public

boosts the economy

The discount rate is the interest

rate Feds charge for loans to commercial or member banks

A change in the legal reserve ratio affects the

amount of excess reserves in banking

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