If Santiago Thinks the Last Dollar Spent on Jeans Yields

question 19

Multiple Choice

If Santiago thinks the last dollar spent on jeans yields less satisfaction than the last dollar spent on shoes, and Santiago is a utility-maximizing consumer, he should

• A) decrease his spending on shoes.
• B) decrease his spending on shoes and increase his spending on jeans.
• C) increase his spending on jeans.
• D) increase his spending on shoes and decrease his spending on jeans.

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Definitions:

Demand Deposits

Demand Deposits are bank account funds that can be withdrawn at any time without any advance notice to the bank.

Original Maturity

The initial fixed period for which a financial instrument, such as a bond or loan, is issued before it is due for repayment.

Required Reserves

The least amount of money that a bank is required to keep on hand as a safeguard for deposits, in compliance with the rules set by central bank authorities.

Demand Deposits

Bank account funds that are available on demand without any delay or penalties, like those in checking accounts.