The table gives data on interest rates and investment demand (in billions of dollars) in a hypothetical economy.
Refer to the above table. Using the Id1 schedule, assume that the government needs to finance the public debt and this public borrowing increases the interest rate from 3% to 4%. How much crowding out of private investment will occur?
A. $100 billion
B. $200 billion
C. $600 billion
D. $700 billion
A. $100 billion
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Explain the economic concept of opportunity cost
What will be an ideal response?
You view tea and scones as perfect complements, and the corners of the indifference curves lie on the 45-degree line. Tea is plotted along the horizontal axis of the indifference map
Also, at your current point of consumption, you have not fully exhausted the available budget, and you consume more tea than scones. Based on this information, which of the following statements is NOT true? A) The marginal utility of tea equals zero for your current consumption bundle. B) The marginal utility of scones equals zero for your current consumption bundle. C) To reach the point of optimal consumption, you must increase your scone consumption. D) The equal marginal principle does not have to be satisfied at the optimal consumption point for this problem.