Table 10-5 -Refer to Table 10-5, Which Lists the Values of Harry

question 290

Multiple Choice

Table 10-5

-Refer to Table 10-5, which lists the values of Harry Taber's marginal utility and marginal utility per dollar for Italian submarine (sub) sandwiches and tacos.Assume that the price of a sub sandwich is $4 and the price of a taco is $2.When Harry's income is $14, he buys two Italian sub sandwiches and three tacos.The last column lists the values of the marginal utility per dollar for tacos when the price of a taco decreases to $1.Complete this statement: As a result of the change in price, the marginal utility of each taco Harry consumes increases and

• A)the substitution effect of the price change will cause Harry to buy more tacos and fewer subs.
• B)the substitution effect of the price change will cause Harry to buy more tacos if they are a normal good, and fewer tacos if they are an inferior good.
• C)the substitution effect will cause Harry to buy another sub because his purchasing power has increased.
• D)the substitution effect will cause Harry to buy fewer tacos.

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Definitions:

Fiscal Policy

involves government spending and tax policies to influence economic conditions, including levels of employment, inflation, and economic growth.

Government Purchases

Expenditures by the government on goods and services that directly affect the economy, including infrastructure and public projects.

Real GDP

Gross Domestic Product adjusted for inflation, reflecting the value of all goods and services produced by an economy in a given year at constant prices.

Net Taxes

The net amount of money paid to the government through taxes after deducting any government transfers or subsidies received.