If a Consumer Is Initially in Equilibrium, an Increase in Money

question 153

Multiple Choice

If a consumer is initially in equilibrium, an increase in money income will

• A)move the consumer to a new equilibrium on a lower indifference curve.
• B)move the consumer to a new equilibrium on a higher indifference curve.
• C)make the slope of the consumer's indifference curves steeper.
• D)have no effect on the equilibrium position.

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Definitions:

Inflation

The acceleration in the general cost levels of goods and services, causing a decline in the ability to acquire.

Real GDP

Real Gross Domestic Product (GDP) measures the value of all final goods and services produced within a country in a given period, adjusted for inflation.

GDP

Gross Domestic Product, the total market value of all final goods and services produced within a country in a given time period.

Current Dollars

A term referring to the value of money not adjusted for inflation, representing the nominal value of economic transactions based on current prices.