The Exponents of a Cobb-Douglas Utility Function,U = C ^$\alpha$ M ^$\alpha$

question 63

Multiple Choice

The exponents of a Cobb-Douglas utility function,U = C ^$\alpha$ M ^{$\alpha$ -1},represent:

• A)the share of income devoted to that good.
• B)the rate at which a consumer can trade one good for the other.
• C)the quantity of each good that is demanded.
• D)the amount of utility each good provides.

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Definitions:

Short-Term Rates

The interest rates on debt securities that mature in the short term, often less than one year, which are a key indicator of the monetary policy stance of an economy.

Federal Reserve

The central banking system of the United States, responsible for monetary policy, regulating banks, maintaining the stability of the financial system, and providing financial services to depository institutions, the U.S. government, and foreign official institutions.

Forward Interest Rate

The interest rate agreed upon today for a loan that will start at a future date, often implied in the terms of a forward rate agreement.

Zero-Coupon Bond

Is a debt security that doesn't pay interest (a coupon) but is traded at a deep discount, providing profit at maturity when the bond is redeemed for its full face value.