Every Consumer Has a Red-Money Income and a Blue-Money Income

question 12

Multiple Choice

Every consumer has a red-money income and a blue-money income and each commodity has a red price and a blue price.You can buy a good by paying for it either with blue money at the blue price or with red money at the red price.Harold has 18 units of red money and 36 units of blue money to spend.The red price of ambrosia is 2 and the blue price of ambrosia is 6.The red price of bubble gum is 1 and the blue price of bubble gum is 2.If ambrosia is on the horizontal axis, and bubble gum on the vertical axis, then Harold's budget set is bounded by

• A)two line segments one running from (0, 36)to (6, 18)and the other running from (6, 18)to (15, 0).
• B)two line segments, one running from (0, 36)to (9, 18)and another running from (9, 18)to (15, 0).
• C)two line segments, one running from (0, 24)to (9, 18)and the other running from (9, 18)to (27, 0).
• D)a vertical line segment and a horizontal line segment, intersecting at (9, 18).
• E)a vertical line segment and a horizontal line segment, intersecting at (6, 18).

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Definitions:

Current Account

This part of a country's balance of payments summarizes the trade balance, net income from abroad, and net current transfers.

Capital Account

A component of a country's balance of payments that records all transactions involving the purchase or sale of assets.

Canadian Dollar

The official currency of Canada, often represented by the symbols CAD or $.

Balance Of Payments

A statement that summarizes a country's transactions with the rest of the world, including trades, loans, and payments.