Points Below Internal Balance Line YY in the Swan Diagram

question 11

Multiple Choice

Points below internal balance line YY in the Swan diagram indicate:

• A)a balance of payments deficit
• B)a balance of payments surplus
• C)unemployment
• D)inflation

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Definitions:

Indifference Curves

Graphical representations in economics showing combinations of goods that give the consumer equal satisfaction and utility.

Utility Function

A utility function is a mathematical representation of a consumer’s preferences, ranking different bundles of goods according to levels of satisfaction.

Indifference Curve

A graph showing different bundles of goods between which a consumer is indifferent, meaning they would derive the same level of satisfaction from any combination.

Bliss Point

The optimal quantity of consumption where any further increase or decrease would lead to a lower level of satisfaction for the consumer.