Consumption Spending Will ________ When Disposable Income ________

question 226

Multiple Choice

Consumption spending will ________ when disposable income ________.

• A)increase; increases
• B)increase; decreases
• C)decrease; increases
• D)change unpredictably; decreases

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Definitions:

Federal Reserve Deposits

Reserves held by commercial banks at the Federal Reserve, which are used to meet reserve requirements and facilitate day-to-day banking operations.

Check Clearing

The process by which banks settle transactions made by checks, ensuring that the funds move from the check writer's account to the recipient's.

Fractional Reserve Banking

A system in which depository institutions held reserves that are less than the amount of total deposits.

Actual Reserves

The amount of funds that a bank has on hand and in reserve accounts, which can be used to meet any withdrawal or payment demands.