1. What are the marginal propensity to consume (MPC) and marginal propensity to save (MPS)? How are the two concepts related? How are the two concepts related to the consumption and saving functions?
2. What is the effect of net exports, either positive or negative, on equilibrium GDP?
3. Explain the three reasons given for the downward slope of the aggregate demand curve.
4. Differentiate between discretionary fiscal policy and nondiscretionary or built-in stabilization policy.
5. Cite three important reasons why nations trade.
6. How is a commercial bank different from a savings and loan association?
7. What are the two significant characteristics of the fractional reserve banking system?
8. Banks pursue two conflicting goals. Explain what they are and why the conflict.
9. Explain how the money market responds to a shortage of money or to a surplus of money.
10. What is the difference between an economic investment and a financial investment?