Economic theory offers ______ about the full range of possible events and responses, which can prevent ______ about how households will respond to changes in prices or incomes.
A. two budget constraint theories; misguided possibilities
B. systematic consumption choices; unrealistic conclusions
C. one budget constraint theory; unrealistic possibilities
D. a systematic way of thinking; misguided conclusions
Answer: D. a systematic way of thinking; misguided conclusions
You might also like to view...
Recall that the Cobb-Douglas Utility function U(X,Y) = XaY1-a has the unusual property that the demand for each good depends only on its own price
Therefore, a consumer will always allocate the same proportion of income to each good. Specifically, the demand for X is X* = aI/px where I is income and px is the price of X. a. What is the price elasticity of demand for X? b. What is the direction of the income effect on X of an increase in px?
As the Fed responded to the financial crisis that followed the collapse of the housing market, certain banks were deemed too:
A. large to fail, as their failure would carry the risk of causing a domino effect in the highly integrated financial system. B. large to stay afloat, as they would be too costly to save. C. small to fail, as they were easy to save. D. large to fail, and were consequently purchased by the government.
International capital flows in an open economy have the effect of
a. reducing the power of monetary policy. b. increasing the power of monetary policy. c. increasing the power of monetary policy in an expansion and reducing it in a contraction. d. reducing the power of monetary policy in an expansion and increasing it in a contraction.
An American computer is priced at $1,200. If the exchange rate between the U.S. dollar and the Mexican peso is $0.09 = 1 peso, approximately how many pesos would a Mexican buyer pay for the computer?
A) 13,333 pesos B) 108 pesos C) 133.50 pesos D) 15,075 pesos