In Problem 7, Harry Mazzola Has the Utility Function U(x₁

question 24

Multiple Choice

In Problem 7, Harry Mazzola has the utility function U(x₁, x₂) = min{x₁ + 2x₂, 2x₁ + x₂}. He has $40 to spend on corn chips and french fries. If the price of corn chips is $1 per unit and the price of french fries is $4 per unit, then Harry will

• A) consume at least as many corn chips as french fries but might consume both.
• B) consume at least as many french fries as corn chips but might consume both.
• C) definitely spend all of his income on french fries.
• D) definitely spend all of his income on corn chips.
• E) consume equal amounts of french fries and corn chips.

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Definitions:

Monetary Policy

Actions undertaken by a central bank, such as the Federal Reserve, to control the money supply and interest rates to achieve macroeconomic objectives like controlling inflation.

Timing Lags

Delays between the implementation of monetary or fiscal policy and the observable effects of these policies on the economy.

Open Market

A freely competitive market in which any buyer or seller can participate, and prices are determined by supply and demand forces.

Goals Of Monetary Policy

The objectives pursued by a country's central bank, including controlling inflation, managing employment levels, and maintaining currency stability.