Suppose Each Good Costs $5 Per Unit and Megan Holds

question 246

Multiple Choice

Suppose each good costs $5 per unit and Megan holds $40. What is the real value of the money she holds?

• A)$40. If the price of goods rises, to maintain the real value of her money holdings she need to hold more dollars.
• B)8 units of goods. If the price of goods rises, to maintain the real value of her money holdings she needs to hold more dollars.
• C)$40. If the price of goods rises, to maintain the real value of her money holdings she need to hold fewer dollars.
• D)8 units of goods. If the price of goods rises, to maintain the real value of her money holdings she needs to hold fewer dollars.

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Definitions:

Human Action

The study of human behaviour, particularly in the context of individuals' decisions and actions in the economy.

Rational Choice

A theory in economics and sociology that suggests individuals always make prudent and logical decisions that provide them with the highest amount of personal utility.

Irrational Choice

A decision made contrary to the conventional understanding of economic rationality, not maximizing utility.

Incentives

Rewards or penalties that motivate individuals to perform an action or avoid it.