If the individuals in a group of consumers all have homothetic tastes, then we can treat the group as a single representative consumer.
Answer the following statement true (T) or false (F)
False
Rationale: If individuals have homothetic tastes, it means that each individual will remain on the same ray from the origin as income changes. But different individuals might optimize on different rays from the origin (and still all have homothetic tastes) -- in which case the change in their consumption as income is redistributed is not offsetting.
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When real GDP equals potential GDP, the quantity theory of money says that an increase in the quantity of money brings an equal percentage
A) decrease in real GDP. B) decrease in velocity. C) decrease in the price level. D) increase in the price level. E) increase in real GDP.
If the desired reserve ratio is 7 percent and a bank has $10,000 of deposits, then its desired reserves are
A) $7. B) $700. C) $9,300. D) $930. E) $7,000.