If Indifference Curves and Budget Lines Are Used to Analyze

question 142

Multiple Choice

If indifference curves and budget lines are used to analyze consumer choice, an inferior good will

• A)escape detection when income rises.
• B)be easily identified because the quantity purchased will fall as income rises.
• C)be easily identified because the quantity purchased will rise as income rises.
• D)be easily identified because it will change the slope of the budget line.
• E)escape detection because this model does not show that relationship.

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Definitions:

Utility

The measure of the welfare or satisfaction of an investor.

Treasury Bills

Short-term government securities issued at a discount from their face value and maturing in one year or less, representing a secure, low-risk investment option.

Interest Rate Fluctuations

Variations in the interest rates over time, affecting borrowing costs and investment returns.

Inflation Uncertainty

The unpredictability regarding the rate at which the general level of prices for goods and services is rising, and subsequently, how purchasing power is being eroded.