Tammy and Tad's Father Has Given Each of Them a Debit

question 3

Essay

Tammy and Tad's father has given each of them a debit card and allows each of them to use the card to spend $500 each month. Tammy and Tad use their $500 to buy only CDs and gasoline. In February, the price of a CD was $10 and the price of gasoline was $1 per gallon. At these prices, Tammy purchased 45 CDs and 50 gallons of gas. Ted consumed 20 CDs and 300 gallons of gas. For the month of March, Tammy and Tad's father lost the records indicating who had which debit card. From the bank statement in March, their father learned that the price of a CD was $12 and a gallon of gas cost $0.80. The first debit card was used to purchase 235 gallons of gas and 26 CDs. The second debit card was used to purchase 265 gallons of gas and 24 CDs. Using revealed preference theory, identify which card Tammy must possess.

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Definitions:

Fed's Purchase

The buying of securities or assets by the Federal Reserve to inject money into the banking system and stimulate economic activity.

Political Pressure

The exertion of influence by individuals or groups to achieve certain actions or policies from government or other authority figures.

Board of Governors

The leading body of a central banking system, such as the Federal Reserve in the United States, responsible for overseeing the nation's monetary policy.

Appointed

Selected or designated for a position or duty, typically by an authority, rather than through election.