Assume That a College Student Purchases Only Ramen Noodles and Textbooks

question 83

Multiple Choice

Assume that a college student purchases only Ramen noodles and textbooks. If Ramen noodles are an inferior good and textbooks are a normal good, then the substitution effect associated with a decrease in the price of Ramen noodles, by itself, will result in

• A)a decrease in the consumption of textbooks and a decrease in the consumption of Ramen noodles.
• B)a decrease in the consumption of textbooks and an increase in the consumption of Ramen noodles.
• C)an increase in the consumption of textbooks and an increase in the consumption of Ramen noodles.
• D)an increase in the consumption of textbooks and a decrease in the consumption of Ramen noodles.

---

Definitions:

Reporting Currency

The currency used in financial statements to represent an entity's financial performance and position, often the national currency where the company is domiciled.

Price-Level-Adjusted Currency

Currency whose value is adjusted according to changes in a price index, to account for inflation or deflation.

Specific Currency

A particular currency chosen for financial transactions or accounting purposes.

Foreign Exchange

The trading and conversion of different national currencies, as well as the global marketplace where such transactions occur.