Suppose Your Payroll Cheque Is Directly Deposited to Your Chequing

question 162

Multiple Choice

Suppose your payroll cheque is directly deposited to your chequing account. Everything else held constant, total reserves in the banking system ________ and the monetary base ________.

• A) remain unchanged; remains unchanged
• B) remain unchanged; increases
• C) decrease; increases
• D) decrease; decreases

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Definitions:

Saving

The portion of income not spent on consumption or taxes, typically put aside for future use or investment.

APC

The acronym for Average Propensity to Consume, which measures the fraction of income that households spend on goods and services rather than saving.

Disposable Income

The cash pile households can utilize for their spending and savings needs after income taxes are handled.

MPC

Marginal Propensity to Consume, which represents the ratio of change in consumer spending to a change in household income.