If the marginal propensity to save (MPS) is 1/8, the value of the simple spending multiplier is:
a. 8.
b. 1/8.
c. 2.
d. 1/2.
e. 4.
QUESTION 2The Coase Theorem states that the private sector can achieve environmental efficiency, as long as property rights are clearly assigned.
a. True
b. False
Indicate whether the statement is true or false
QUESTION 3The Federal Reserve may increase the money supply by:
a. selling a bond to a member bank.
b. selling a bond to a securities dealer.
c. lending reserves to banks.
d. increasing required reserve ratios.
e. increasing the discount rate.
QUESTION 4Which of the following is true of the simple spending multiplier
a. It equals the ratio of the marginal propensity to consume to the marginal propensity to save.
b. It equals the difference between the marginal propensity to save and the marginal propensity to consume.
c. It is the reciprocal of the marginal propensity to save.
d. It is the reciprocal of the marginal propensity to consume.
e. It is the sum of the marginal propensity to consume and the marginal propensity to save.
QUESTION 5Combating the greenhouse effect does not create classic free-rider problems.
a. True
b. False
Indicate whether the statement is true or false
QUESTION 6Raising the discount rate is:
a. an expansionary policy because it raises the ratio of excess to total reserves in the banking system.
b. a contractionary policy on the part of the member banks of the Fed because it raises the firms' costs of borrowing from them.
c. a contractionary policy on the part of the Fed because it raises the commercial banks' cost of borrowing from it.
d. an expansionary policy on the part of the member banks of the Fed because it raises their profits relative to those of the nonmember banks.
e. an expansionary policy on the part of the Fed because increasing the interest rates that the banks are allowed to charge will increase their willingness to make loans.
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