Using the concept of the budget constraint and indifference curves, explain how a consumer maximizes total utility.
What will be an ideal response?
Rational consumers maximize total utility given their budget constraints. Each consumer has an indifference map. Each indifference curve shows various combinations of two goods that have the same level of utility. The consumer will maximize total utility of two goods where the highest indifference curve is tangent to the budget constraint line.
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Monetarists argue that government deficits financed by monetary expansion cause(s)
A) velocity to increase. B) aggregate demand to increase. C) aggregate demand to decrease. D) no change in aggregate demand or aggregate supply.
Which of the following events will increase long-run aggregate supply?
A) an increase in the interest rate B) an increase in resource prices C) a decrease in expected profit D) an advance in technology
The figure below depicts the IS-LM-FE model with floating exchange rates.
At point B, the domestic currency
A. is under pressure to depreciate. B. is at its highest possible value in the foreign exchange market. C. is under pressure to appreciate. D. can remain relatively stable.
In the Solow model, if productivity doesn't change,
A. the capital-labor ratio must rise. B. the capital-labor ratio must decline. C. the economy must eventually reach a steady state. D. there can be no saving.