Max has allocated $100 toward meats for his barbecue. His budget line and an indifference map are shown in the above figure. What happens if Max's mother gives him 10 pounds of burger?
A) Max would have preferred receiving the dollar value of the burger.
B) Max is indifferent between this gift and the dollar value of the burger.
C) Max prefers this gift to the dollar value of the burger.
D) None of the above.
B
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Refer to the table above. An increase in the real interest rate from 2% to 6% will:
A. Decrease the equilibrium level of GDP by $200 billion
B. Decrease the equilibrium level of GDP by $300 billion
C. Decrease the equilibrium level of GDP by $400 billion
D. Increase the equilibrium level of GDP by $400 billion
Your artistically talented friend Pablo offers to sell you one of his paintings that he knows you enjoy looking at. You value this enjoyment at $100 and then expect to sell the painting at the end of one year for $500. You would buy the painting when interest rates are at 5% so long as the price he asks for is no greater than
a. $600. b. $576. c. $500. d. $400.