Tax and Fiscal Policy Terms Marginal Propensity to Consume - A number that describes the amount of an additional dollar of income that a consumer will spend rather than save. Monetary Policy - Policy enacted by the Fed to affect output. The three basic types include performing open market operations, changing the reserve requirement, and manipulating the federal funds interest rate. Money - A means of exchange, store of value, and unit of account within an economy. Money Multiplier - The number that describes the total change in the money supply resulting from a single deposit in a bank under a fractional reserve banking system. Money Supply - The total amount of money in an economy including both demand deposits and currency. Multipliers - Numbers that dictate the overall effect of a policy change on the output of an economy. National Income - Output. (See the definition of output.) Open Market Operations - The purchase and sale of government bonds by the Fed as a form of monetary policy. Output
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