When will an individual's indifference curves be identical with the iso-expected value lines?
a. Never.
b. When the individual is risk averse.
c. When the individual is risk neutral.
d. When the individual is risk preferring.
c. When the individual is risk neutral.
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Sue consumes apples and bananas. Suppose Sue's income doubles and the prices of apples and bananas do not change. Sue's budget line will
A) shift leftward and its slope will not change. B) remain unchanged. C) shift rightward and its slope will not change. D) shift rightward and become steeper.
Your roommate argues that he can think of no better situation than living in a deflationary economy, as prices of goods and services would continuously fall. You disagree and argue that during a deflation, people can be made worse off because
A) the value of the real interest rate will drop below the nominal interest rate. B) borrowers will have to pay increasing amounts in real terms over time. C) the purchasing power of people's incomes would increase. D) the purchasing power of the currency would decrease.
An increase in the U.S. demand for the Mexican peso
A) causes an increase in the U.S. dollar price of a Mexican peso. B) causes the Mexican peso to appreciate. C) causes the U.S. dollar to depreciate. D) causes Mexican goods to be relatively more expensive. E) All of the above.
If income falls without any change in interest rates, then according to the IS-LM model it may be true that:
a. money demand fell and government spending declined. b. the money supply increased and taxes declined. c. tight monetary policy and easy fiscal policy. d. easy monetary policy and easy fiscal policy.