If a consumer has a choice between only two goods and both of them are perfect complements what would the indifference curve look like and why?
What will be an ideal response?
The indifference curves would be "L-shaped". The reasoning is that one good must be accompanied by the other good in order to give the first any utility. Having more of the second good however, doesn't make the person any better off.
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Refer to Figure 10-3. Which of the following is consistent with the graph depicted above?
A) The government runs a budget deficit. B) An expected recession decreases the profitability of new investment. C) Taxes are changed so that real interest income is taxed rather than nominal interest income. D) Technological change increases the profitability of new investment.
If the rate of inflation in a given time period turns out to be higher than lenders and borrowers anticipated, then the effect will be:
a. no change in the distribution of wealth between lenders and borrowers. b. a net gain in purchasing power for lenders relative to borrowers. c. a redistribution of wealth from borrowers to lenders. d. a redistribution of wealth from lenders to borrowers.