The distinction between M1 and M2 has blurred over time because:
a. M1 is now larger than M2.
b. depositors can transfer funds between accounts easily.
c. the Federal Reserve has defined them less precisely.
d. M1 is becoming less liquid.
e. banks are now offering time deposits.
QUESTION 2The optimal level of pollution is:
a. the level at which the marginal social cost of air quality equals the marginal social benefit.
b. the level at which the average social cost of air quality equals the average social benefit.
c. the level at which the total social cost of air quality equals the total social benefit.
d. zero.
QUESTION 3The marginal propensity to consume:
a. is the proportion of disposable income that is consumed.
b. is the ratio of disposable income to consumption.
c. is the change in consumption relative to a change in disposable income.
d. minus the marginal propensity to save must equal 1.
e. is greater than 1 at all levels of income.
QUESTION 4M2 consists of:
a. M1 plus savings accounts, small time deposits, money market mutual funds, and miscellaneous near-monies.
b. coins, currency, and checkable deposits only.
c. only near-monies.
d. M1 plus time deposits only.
e. M1 plus money market mutual funds only.
QUESTION 5To maximize social welfare in the presence of a negative externality, marginal ____ must equal marginal ____.
a. social cost; private cost
b. private cost; social cost
c. social cost; social benefit
d. private cost; social benefit
QUESTION 6The marginal propensity to consume is:
a. the relationship between a change in consumption and a change in income.
b. the relationship between a change in consumption and a change in saving.
c. the relationship between changes in consumption and changes in net wealth.
d. the ratio of income to consumption at any given level of income.
e. the ratio of total consumption to total saving.
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