The slope of the budget line represents:
A. the budget rate of substitution.
B. the opportunity rate of substitution.
C. the market rate of substitution.
D. the marginal rate of substitution.
Answer: C
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If preferences are one-dimensional and preferences are single peaked, majority rule will result in selection of the project most favored by:
a. no one. b. the median voter. c. the average voter. d. everyone.
The figure below shows an IS-LM-FE model for an economy with fixed exchange rates. Initially the economy is at Point A, a triple intersection. Here, the FE curve is steeper than the LM curve.
To maintain the fixed exchange rate and keep the economy at Point B, the monetary authority must
A. sell foreign currency and sell domestic government bonds. B. buy foreign currency and sell domestic government bonds. C. buy foreign currency and buy domestic government bonds. D. sell foreign currency and buy domestic government bonds.