What Can We Say About APC + APS and MPC

question 337

Multiple Choice

What can we say about APC + APS and MPC + MPS?

• A) Each must sum to 1.
• B) MPC + MPS = 100% of total income.
• C) APC + APS = 100% of the change in income.
• D) MPC + MPS always equals 1, but the sum of APC + APS can vary.

---

Definitions:

Bank Insolvency

A situation where a bank's liabilities exceed its assets, making it unable to meet its obligations and continue its operations.

Excess Reserves

Banks' reserves that exceed the minimum requirement set by a central bank, not lent out and often kept for emergency purposes.

Reserve Requirement

The minimum amount of reserves that banks must hold against deposits, as mandated by central banks.

Fractional Reserve

A banking system in which only a fraction of bank deposits are backed by actual cash on hand, with the rest being available for loans.