"Fractional Reserve Banking" refers to:
Answer(s): D
In a fractional reserve system, a bank can loan out almost all of the deposits it receives, maintaining only a small part as reserves to meet regular withdrawals and as a provision for loan defaults.
The phrase, "GDP equals what you eat plus what you invest plus what you export" characterizes which of the following methods?
Answer(s): A
The Expenditure approach has four components:1. Personal consumption expenditure.2. Gross private domestic investment (investments by people residing outside the country are ignored, even if they happen to be citizens of the country).3. Government consumption & investment.4. Net exports.These can be summarized as "GDP equals what you eat plus what you invest plus what you export."
The current account trade balance + the capital account trade balance =
Answer(s): F
By accounting identity, the capital account and current account must balance to zero. If there is a deficit in one, there must be a surplus in the other. This is one reason why if a nation has a government budget deficit, which amounts to negative domestic investment, the shortfall could be made up by foreigners, causing a capital account surplus. Conversely there must be a current account deficit in such a situation. This is one reason why budget deficits and trade deficits are linked. Note that the term "trade balance" usually refers to the current account.
Mathematically, the marginal propensity to consume is
Answer(s): B
The marginal propensity to consume is found according to the following equation:MPC = total change in consumption / total change in income
The rate of unemployment is equal to:
The labor force of an economy consists of adults (defined as being of age 16 and above) who are either employed or actively seeking employment. The unemployment rate is then the fraction of the labor force that is not employed.
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