Utility theory assumes that marginal utility:
a. increases as an individual consumes more of a product.
b. decreases as an individual consumes more of a product.
c. is zero as long as the individual derives utility from the product.
d. is constant as long as the individual derives utility from the product.
e. is constant as long as the individual derives satisfaction from the product.
b
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Assume the government decides to reduce spending in order to reduce the budget deficit, which it financed by borrowing in the real credit market. What is the first round effect on the value of the domestic currency, if there is high mobility in the international capital markets?
a. The value of the currency rises. b. The value of the currency falls. c. The value of the currency is unaffected. d. The change in the value of the currency is ambiguous.