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Smedley,a Careful Utility Maximizer,consumes Peanut Butter and Ice Cream

question 10

Multiple Choice

Smedley,a careful utility maximizer,consumes peanut butter and ice cream.Assume that both peanut butter and ice cream are normal goods.Right after he achieves the utility-maximizing level of consumption of the two goods,the price of ice cream increases.To adjust to this event,he consumes _____ peanut butter and _____ ice cream.


Definitions:

Adjusting Journal Entries

Entries made at the end of an accounting period to update balances of revenues and expenses to reflect the correct amounts earned or incurred during a period.

Accrual

A financial recording approach that logs income and expenditures at the time they occur, irrespective of the actual cash transaction timing.

Adjusting Journal Entry

A type of journal entry made at the end of an accounting period to allocate income and expenditure to the period in which they actually occurred.

Accrual

The accounting practice that documents income and expenditures at the time they happen, irrespective of the timing of the actual cash flows.

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