Most people would prefer to drive a luxury car that has all the options, but more people buy less expensive cars even though they could afford the luxury car because
A) luxury cars cost a lot more than non-luxury cars.
B) the marginal utility per dollar spent on the less expensive car is higher than that spent on luxury cars.
C) car buyers are irrational.
D) the total utility of less expensive cars is greater than that of luxury cars.
B
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If expected inflation is constant and the nominal interest rate increases by 3.5 percentage points, then the real interest rate
a. increases by 3.5 percentage points. b. increases, but by less than 3.5 percentage points. c. decreases, but by less than 3.5 percentage points. d. decreases by 3.5 percentage points.
Suppose that the U.S. exchange rate is expected to fall in the future. As a result, in the foreign exchange market, there will be
A) an increase in the demand for dollars, a decrease in the supply of dollars, and a rise in the equilibrium exchange rate. B) an increase in the demand for dollars, a decrease in the supply of dollars, and a fall in the equilibrium exchange rate. C) a decrease in the demand for dollars, an increase in the supply of dollars, and a rise in the equilibrium exchange rate. D) a decrease in the demand for dollars, an increase in the supply of dollars, and a fall in the equilibrium exchange rate.