If Bernice (Whose Utility Function Is Min={x, Y}, Where X

question 26

Multiple Choice

If Bernice (whose utility function is min={x, y}, where x is her consumption of earrings and y is money left for other stuff) had an income of $15 and was paying a price of $8 for a pair of earrings, then if the price of earrings went up to $13, the equivalent variation of the price change would be

• A)$5.36.
• B)$8.33.
• C)$16.67.
• D)$2.68.
• E)$6.85.

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Definitions:

Central Banks

National banks that provide financial and banking services for their country's government and commercial banking system, often controlling the national currency and monetary policy.

Managed Floating Exchange Rates

A currency exchange rate system where the currency value is influenced by supply and demand, but with occasional intervention by the central bank.

U.S. Trade Deficits

The situation where the United States imports more goods and services than it exports, resulting in a negative trade balance.

Domestic Consumption

The total amount of goods and services consumed within a country.