An optimizing consumer will select the consumption bundle in which the marginal rate of substitution
a. is equal to the relative price ratio of the goods.
b. exceeds the marginal utility of each good by the greatest amount.
c. is less than the slope of the budget constraint.
d. All of the above are correct.
a
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In any economy functioning at potential GDP, there are occasions when the short-term aggregate supply curve unexpectedly shifts, causing inflationary pressures. Which of the following is considered to be a common cause of this type of shift?
A. overoptimistic lending by banks B. sudden rise in input prices C. a surge of export sales D. a wave of government spending
Which of the following policies would be most likely to encourage households to save more?
a. Significant reductions in the social safety net b. Increasing social security benefits to all recipients, regardless of their contribution into the system c. Elimination of the tax deduction on individual retirement account (IRA) contributions d. Replacement of sales and excise taxes with an income tax e. Elimination of government insurance of bank deposits