Exhibit 6A-3 Consumer Equilibrium

question 169

Multiple Choice

Exhibit 6A-3 Consumer equilibrium
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Given the budget line and indifference curves shown in Exhibit 6A-3, at point Z:

• A) P_x exceeds P_y.
• B) MU_x = MU_y.
• C) MRS = P_x / P_y.
• D) MRS = P_y / P_x.

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Definitions:

Spot Rate

The current price or rate for immediate settlement of a commodity, security, or currency exchange.

Initial Cost

The upfront expenditure associated with the purchase or investment in an asset or project.

Exchange Rates

Exchange rates are the value of one currency for the purpose of conversion to another, influencing international trade and investments.

Purchasing Power Parity

An economic theory that compares different countries' currencies through a "basket of goods" approach, suggesting that exchange rates should adjust to equalize the price of identical goods in different countries.