The Budget Line Shift from Ab to Cd in the Figure

question 132

Multiple Choice

The budget line shift from ab to cd in the figure is consistent with

• A)decreases in the prices of both M and N.
• B)an increase in the price of M and a decrease in the price of N.
• C)a decrease in money income.
• D)an increase in money income and decrease in the price of N.

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Definitions:

Vertical Analysis

The presentation of a company’s financial statements in common-size form.

Common-Size Statements

Financial statements that present all line items as percentages of a common base figure such as total assets or sales, to allow for easy comparison.

Acid-Test Ratio

A financial metric that measures the immediate liquidity position of a company by comparing its most liquid assets (excluding inventory) against its current liabilities.

Marketable Securities

Financial instruments and assets that can be easily sold or converted into cash without a significant loss of value.