If the consumption function can be described as C = 200 + .80Y, the marginal propensity to save is equal to
A) -0.80.
B) 0.80.
C) 0.20.
D) 200.
C
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a. movement along the budget constraint holding satisfaction constant. b. shift in the budget constraint at the old prices. c. movement along the consumer's new indifference curve at the new prices. d. movement along the original indifference curve to the point where the marginal rate of substitution equals the price ratio for the new set of prices.
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Assume a simplified banking system in which all banks are subject to a uniform reserve requirement of 20 percent and checkable deposits are the only from of money. A bank that received a new checkable deposit of $10,000 would be able to extend new loans up to a maximum of:
A. $2,000. B. $8,000. C. $9,000. D. $10,000.
When the Fed sells bonds, the money supply:
A. Selling bonds does not affect the money supply. B. sometimes rises and sometimes falls. C. contracts. D. expands.