Suppose at the consumer's current consumption bundle the marginal rate of substitution of cheese for wine is 1/2 bottle of wine per pound of cheese. The price of one pound of cheese is $6, and the price of a bottle of wine is $10 . The consumer should increase his consumption of
a. cheese, decrease his consumption of wine, and move to a lower indifference curve.
b. cheese, decrease his consumption of wine, and move to a higher indifference curve.
c. wine, decrease consumption of cheese, and move to a higher indifference curve.
d. cheese, decrease consumption of wine, and remain on the same indifference curve.
b
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Comparing M1 and M2 we know that
A) M1 is larger because it contains currency. B) M2 is approximately equal to M1. C) M2 is larger because it contains M1 and other assets. D) M2 is larger because it contains more liquid assets than does M1.
Marginal revenue product is measured in dollars per unit of output
a. True b. False
If the Federal Reserve is currently paying 1 percent interest on bank reserves, but then reduces that interest rate to 0.5 percent, banks may decide to hold ________ reserves, and the money supply may ________.
A. fewer; increase B. more; decrease C. more; increase D. fewer; decrease
Expansionary policy that followed the 2008 recession:
A. did not reduce unemployment as much as desired. B. led to higher inflation rates than expected. C. did not reduce the trade deficit as much as desired. D. led to higher growth rates than expected.