The Following Graph Shows the Marginal Cost (MC) and Marginal

question 3

Multiple Choice

The following graph shows the marginal cost (MC) and marginal benefit (MB) of holding real money balances. The market is initially in equilibrium at £100. Refer to the graph to answer the question. Suppose there is an increase in real incomes. Other things remaining the same, which of the following is true?

• A) The new equilibrium level of real money balances will be equal to £175.
• B) The marginal cost line will move from MC1 to MC2.
• C) The marginal benefit line will move from MB1 to MB2.
• D) The new equilibrium level of real money balances will be equal to £75.

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Definitions:

Manipulative

Characterized by the skillful handling, controlling, or influencing of others in a clever or unscrupulous way.

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A type of mental disorder characterized by enduring maladaptive patterns of behavior, cognition, and inner experience.

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A neurodevelopmental disorder characterized by a pattern of inattention, hyperactivity, and impulsivity that is more severe than typically observed in individuals at a comparable level of development.