Exhibit 6-6 Marginal Utility for Data for Clothes and Amusement

question 130

Multiple Choice

Exhibit 6-6 Marginal utility for data for clothes and amusement $$\begin{array} { | c | c | c | } \hline \text { Quantity } & \text { Clothes } & \text { Amusement } \\\hline 1 & 15 & 20 \\2 & 13 & 18 \\3 & 10 & 15 \\4 & 8 & 12 \\5 & 6 & 10 \\\hline\end{array}$$
-Refer to Exhibit 6-6. Your budget is $50. The price of amusement goods is $10. If the price of clothes falls to $4, which of the following statements is true?

• A) The marginal-utility-to-price ratio for clothes will decrease.
• B) The marginal-utility-to-price ratio for clothes will increase.
• C) The quantity demanded of clothes will decrease.
• D) Both b and c are true.
• E) The quantity demanded for amusement goods will remain constant.

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Definitions:

Velocity of Money

The rate at which money is exchanged from one transaction to another and how much a unit of currency is used in a given period of time.

Classical Assumption

In economics, refers to the traditional ideas that free markets function under equilibrium with full employment and price flexibility.

Money Balances

The total amount of money held by an individual or entity at any given time.

Discretionary Monetary Policy

Monetary policy actions that are based on the judgment of policymakers rather than set by predetermined rules, allowing flexibility in response to economic conditions.