The actual money multiplier is smaller than the simple money multiplier because:
a. the actual multiplier affects M2 rather than M1.
b. cash withdrawals reduce the amount banks can lend out.
c. the actual multiplier affects the amount of excess reserves each bank holds.
d. the size of the simple multiplier depends on the volume of deposits unlike the actual multiplier.
e. the actual multiplier uses a different measure of reserve requirements.
Question 2
The fraction of a change in disposable income that is consumed is called _____.
a. autonomous consumption
b. induced consumption
c. the multiplier
d. the marginal propensity to consume
e. the marginal propensity to save
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