The Purchase of a New House Is the One Form

question 25

Multiple Choice

The purchase of a new house is the one form of

• A)investment that is financed by private saving rather than public saving.
• B)household spending that is not counted as part of investment in the national income accounts.
• C)household spending that is investment rather than consumption.
• D)household spending that does not contribute to GDP.

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Definitions:

Optimal Consumption Bundle

The consumption bundle that maximizes a consumer’s total utility given that consumer’s budget constraint.

Budget Constraint

The limitation on the consumption bundles that a consumer can afford, based on income and prices.

Marginal Utility

The additional satisfaction or benefit (utility) that a consumer derives from buying an additional unit of a commodity or service.

Iced Tea

A chilled form of tea, often sweetened and served with ice, popular as a refreshing beverage.