Alfredo Lives on Apples and Bananas Only

question 28

Multiple Choice

Alfredo lives on apples and bananas only.His utility function is U(a, b) = min{a + b, 2b}.He maximizes his utility subject to his budget constraint and consumes the bundle (a, b) = (4, 4) .

• A)p_a > p_b.
• B)p_a is less than or equal to p_b.
• C)p_a = p_b.
• D)p_a = 2p_b.
• E)None of the above.

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Definitions:

Checkable Deposits

Bank accounts on which checks can be drawn. These include checking accounts and demand deposits that allow owners to write checks against their account balances.

Excess Reserves

Funds that banks hold over and above the regulatory requirement, which can influence the bank's ability to lend and the overall money supply.

Required Reserve Ratio

The fraction of deposits that banks are required to hold in reserve and not lend out, set by the central bank.

Required Reserves

This refers to the minimum amount of funds that a bank must hold in reserve against deposit liabilities, as mandated by central banking authorities.