What Is the Difference Between a Budget Line and an Indifference

question 13

Multiple Choice

What is the difference between a budget line and an indifference curve?

• A) One is measured in dollars while the other in units of goods.
• B) One shows what is possible while the other shows what is preferred.
• C) One shows a positive relationship, and the other shows a negative relationship.
• D) The budget line is bowed in toward the origin, and the indifference curves are linear.
• E) There is no difference.

---

Definitions:

Mean

A statistical measure of central tendency, commonly understood as the average value of a set of numbers.

Expected Return

The anticipated amount of gain or loss that an investor can expect from an investment, based on historical or projected returns.

Real Return

The profit or loss on an investment adjusted for inflation, reflecting the actual purchasing power of the return.

Small U.S. Stocks

Refers to shares in small-cap companies based in the United States, typically characterized by a small market capitalization.