Macro Test 2

The behavior of the Federal Reserve concerning the nation’s money supply and interest rate

• Monetary Policy

• Fiscal Policy

• Discretionary Fiscal Policy

The government’s spending and taxing policies

• Monetary Policy

• Fiscal Policy

• Discretionary Fiscal Policy

Changes in taxes or spending that are the result of deliberate changes in government policy

• Discretionary Fiscal Policy

• Fiscal Policy

• Monetary Policy

Yd ≡ Y − T

𝑑𝑖𝑠𝑝𝑜𝑠𝑎𝑏𝑙𝑒 𝑖𝑛𝑐𝑜𝑚𝑒 ≡ 𝑡𝑜𝑡𝑎𝑙 𝑖𝑛𝑐𝑜𝑚𝑒 − 𝑡𝑎𝑥𝑒𝑠

• True

• False

As consumption increases, income

• decreases

• increases

• remains the same

As consumption decreases, taxes

• increases

• decreases

Δ𝐶 = 𝑏Δ𝑌

Marginal Propensity to Consume (MPC) is

• c

• b

• y

Δ𝑆 = (1 − 𝑏)Δ𝑌

The marginal propensity to save is equal to

• s

• (1-b)

• y

Saving increases as income increases, and Saving decreases as taxes increase

• True

• False

budget deficit ≡ 𝐺 − 𝑇

budget surplus ≡ 𝑇 − 𝐺

True or False?

• G= Gov't spending

  T= Collected Taxes

  True

• G=Gov't saving

  T= Taxes Unpaid

  False