For Two Goods, a and B, the Rational Spending Rule

question 86

Multiple Choice

For two goods, A and B, the rational spending rule is expressed as:

• A)MUA = MUB.
• B)MUA × MUB = PA × PB.
• C)(MUA/PB)= (MUB/PA).
• D)(MUA/PA)= (MUB/PB).

---

Definitions:

Without Recourse

A term indicating that the seller of an asset is not responsible for the buyer's losses if the asset fails to perform as expected.

Bad Debt Risk

The probability that loans or receivables will not be collected and will result in a loss for the lender or creditor.

Commitment Fee

A banking charge imposed on a borrower to keep a line of credit open or to guarantee a loan's terms.

Bank Line

A bank line or line of credit is an arrangement between a financial institution and a customer that sets the maximum loan balance that the borrower can access.