Derive the budget line equation for the case where good 1 is a composite good. What is the vertical intercept and what is the slope?
What will be an ideal response?
Since p1 = 1, the usual budget line equation x2=I/p2- (p1/p2)x1 becomes
x2=I/p2- (1/p2)x1, an equation with a vertical intercept of I/p2 and a slope of - (1/p2).
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The ability of an individual, firm, or country to produce a certain good at a lower opportunity cost than other producers is referred to as:
A) marginal advantage. B) absolute advantage. C) cardinal advantage. D) comparative advantage.
Does it appear that currency boards make fixed exchange rates credible?
What will be an ideal response?
Sometimes, we observe cases where the price of a product rose and the quantity bought by buyers also increased. Such cases occur due to a violation of the:
A. Law of Demand B. Law of Supply C. Allocative efficiency rule D. Ceteris paribus assumption
Suppose that a new customer opens a checking account and a saving account, placing $50,000 in each. Later, the bank makes a loan of $100,000 to a business firm. For this bank
A) assets increased by $100,000 because the loan is an asset, and liabilities increased by $100,000 because the checking and saving accounts are liabilities. B) assets increased by $100,000 because the checking and saving accounts are assets, and liabilities increased by $100,000 because the loan is a liability. C) assets increased by $50,000 because the saving account is an asset, while liabilities increased by $50,000 because the checking account is a liability. D) assets remained unchanged but liabilities increased by $100,000 because of the loan.