- D. Whenever the propensity to save increases, the value of the spending multiplier decreases because as people
are saving more, they are spending less. Saving and consumption are inversely related. - C.When the economy is experiencing a rising price level, the Fed is likely to implement a restrictive monetary
policy to help slow down the rate at which the price level is rising. The Fed cannot directly influence the
employment level. - D. Checkable deposits are a part of M1.
- A.An increase in the money supply will lead to a decrease in interest rates. Banks will lower their rates to create
incentives for consumers to borrow.
Part II: Macroeconomics