Assume the graph shown represents Dana's budget constraint. If Dana's income to spend on these two items decreased, which of the following could be said?
A. Dana will derive more utility from each item, because she values each one more now that she's poorer.
B. Dana will be able to buy less of both goods.
C. Dana will buy more hairbands now because they are relatively less expensive.
D. All of these are true.
Answer: B
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The long-run rate of unemployment to which an economy always gravitates is the
A) normal rate of unemployment. B) natural rate of unemployment. C) neutral rate of unemployment. D) inflationary rate of unemployment.
Suppose the Fed changes the interest rate in an attempt to raise planned investment. But in spite of this, planned investment remains unchanged. The most likely explanation is that
A) we have moved downward along an unchanged rate-of-return line. B) we have moved upward along an unchanged rate-of-return line. C) the rate-of-return line has shifted to the left. D) the rate-of-return line has shifted to the right.