Refer to the Diagram, in Which the Downsloping Lines Are

question 131

Multiple Choice

Refer to the diagram, in which the downsloping lines are budget lines and I₁, I₂, and I₃ comprise an indifference map. The combinations of products M and N indicated by points 1, 3, and 5 are such that

• A) all three imply the same level of utility.
• B) 1 and 5 imply a higher level of utility than does 3.
• C) 3 implies a higher level of utility than does 1 or 5.
• D) the person is indifferent among the three combinations.

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Definitions:

Depression

An extended period of significant decline in economic activity across an economy, characterized by high unemployment, low consumer spending, and reduced industrial output.

Full Employment

A situation in an economy where all available labor resources are being used in the most economically efficient way, often characterized by the absence of cyclical unemployment.

Unemployment Rate

The statistic representing the percentage of the labor force that is out of work but seeking employment.

World War II

A global conflict lasting from 1939 to 1945, involving most of the world's nations including all of the great powers, eventually forming two opposing military alliances: the Allies and the Axis.