Jeff Likes Pepsi and Pizza

question 54

Multiple Choice

Jeff likes Pepsi and pizza. When the price of pizza rises, the substitution effect causes Pepsi to be relatively

• A) more expensive, so Jeff buys more Pepsi.
• B) more expensive, so Jeff buys less Pepsi.
• C) less expensive, so Jeff buys more Pepsi.
• D) less expensive, so Jeff buys less Pepsi.

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Definitions:

Reserves

Funds that banks use to satisfy the cash demands of their customers and the reserve requirements of the Fed; reserves consist of cash held by banks plus deposits at the Fed.

Acquire Funds

The process of obtaining capital or money to finance operations, investments, or other business activities.

Foreign Exchange Markets

Markets involving the trading of currencies worldwide which facilitate currency conversion for international transactions and investments.

Stability

The condition where an economy or a financial system operates without excessive fluctuations or crises.