Figure 3.2.4 -To Simplify Our Consumption Models, Suppose U.S. Consumers Only Purchase

question 77

Multiple Choice

Figure 3.2.4
-To simplify our consumption models, suppose U.S. consumers only purchase food and all other goods where food is plotted along the horizontal axis of the indifference map. If the U.S. Congress passes an economic stimulus package that pays $300 to each person, how does this affect the budget line for each consumer?

• A) Makes the budget line steeper
• B) Makes the budget line flatter
• C) Parallel outward (rightward) shift
• D) Parallel inward (leftward) shift
• E) none of the above

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Definitions:

Internationally Traded Goods

Products and services that are sold and bought across national borders, subject to international trade regulations and agreements.

Purchasing Power Parity

An economic theory that compares different countries' currencies through a "basket of goods" approach to determine their relative value.

Exchange Rate

The exchange value of one currency against another.

Identical Basket

A concept used in economics to compare the cost of a specific set of goods and services across different geographical locations or time periods.