The figure above shows Ilene's budget line. If her dog, Muffin, runs away and she adopts another cat, named Sphynx, the budget line shown in the figure will
A) become flatter.
B) become steeper.
C) shift outward (because cats eat less).
D) not move.
D
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In the consumption function C = a + c(Y - T), induced consumption is
A) a + c(Y - T). B) a + cY. C) cY. D) c(Y - T).
Suppose a tax cut that had been anticipated by households and businesses doesn't happen. Describe a new Keynesian analysis of the consequences of this "event."
What will be an ideal response?
Suppose Dean has $500 and there are two companies he could invest X dollars in: Dog Gone Salon, which has a payoff of 2X with 50% probability and $0 with 50% probability and Pretty Kitty Grooming, which has a payoff of 4X with 25% probability and $0 with 75% probability. Dean's expected payoff from investing in Dog Gone Salon only is:
A. $1,000. B. $500. C. $0. D. $1,500.
Assume the government decides to decrease taxes and to finance the expected budget deficit with borrowing in the real credit market. Where and how should you begin your analysis when analyzing the chain reaction of economic interactions?
a. Start the analysis in the real goods market with aggregate demand shifting to the right. b. Start the analysis in the real goods market with aggregate supply shifting to the left. c. Start the analysis in the real goods market with aggregate supply shifting to the right. d. Start the analysis in the real credit market with demand for real credit shifting to the left. e. Start the analysis in the real credit market with demand for real credit shifting to the right.