The equation for the spending multiplier is:

In Figure 3-6 above, income and actual expenditures are equal at

A) point J. B) point K. C) point L. D) all of the above.

Suppose a consumer's expected utility function given two possible states of nature A and B can be expressed in terms of dollars worth of food consumption, F, in both states as U(FA, FB) = [0.6 × ln(FA)] + [0.4 × ln(FB)]. For this utility function, MUA is (0.6/FA) and MUB is (0.4/FB). Without insurance, the consumer can consume 200 in state A but only 50 in state B. The consumer can purchase insurance at a premium of 50 cents per dollar of benefit. How much insurance will she purchase?

A. $50 B. $150 C. $250 D. $416.67