Figure 21-2 in Each Case, the Budget Constraint Moves from BC₁ to BC₁

question 98

Multiple Choice

Figure 21-2
In each case, the budget constraint moves from BC₁ to BC₂.
Graph (a)
Graph (b)
Graph (c)
Graph (d)
-Refer to Figure 21-2. Which of the graphs in the figure reflects an increase in the price of good X only?

• A)Graph (b)
• B)Graph (a)
• C)Graph (c)
• D)Graph (d)

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Definitions:

Double Coincidence of Wants

A situation in a barter system where two parties each hold an item the other wants, allowing them to exchange goods directly without the need for money.

M1

A category of the money supply that includes physical currency and coin, demand deposits, traveler's checks, and other checkable deposits.

Travelers Checks

Pre-printed, fixed-amount checks designed to allow the person signing them to make an unconditional payment to someone else as a result of having paid the issuer for that privilege.

Reserve Ratio

The fraction of deposits that banks are required to keep on hand as reserves, either in their vaults or with the central bank, to ensure liquidity.