Explain how a consumer maximizes utility
What will be an ideal response?
To maximize utility, the consumer allocates income among goods and services such that the last dollar spent on each good purchased yields the same amount of marginal utility. This occurs if
(MUa/Pa) = (MUb/Pb) = . . . = (MUz/Pz).
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Define the following terms and explain their significance to the study of macroeconomics:
a. fiscal policy b. transfer payments c. effect of income taxes on the multiplier d. supply-side tax cuts
Which statement is true?
A. Income is fairly evenly distributed in the U.S. B. The richest 1% of our population has nearly 50% of the income. C. The percentage of Americans below the poverty line has been falling steadily (except for recession) since the 1950s. D. Eleven percent of the children under six living in a two parent home are poor.