Mr. Rational has $27 that he plans to spend purchasing 5 units of good X (priced at $3 per unit) and 6 units of good Y (priced at $2 per unit). The marginal utility of the fifth unit of X is 30, and the marginal utility of the sixth unit of Y is 30 . If Mr. Rational is a utility maximizer, he should:
a. not buy anything.
b. buy more of X and less of Y.
c. buy less of X and more of Y.
d. buy X and Y in the quantities indicated.
e. buy less of X and even lesser than that of Y.
c
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The adaptive expectations theory suggests that:
a. the price level that people expect in the future is based on the behavior of prices in the past. b. the unemployment rate adapts immediately to the inflation rate. c. people have perfect foresight and always predict future price levels correctly. d. people use all current information available to formulate their inflation expectations. e. people react spontaneously to price level changes and do not consider any past or present information.
Demand-pull inflation is often summed up as
A. too many dollars chasing too few goods. B. the wage-price spiral. C. profit-push inflation. D. supply-side cost shock inflation.