Why do consumers prefer higher indifference curves (farther to the right) to lower indifference curves?
What will be an ideal response?
When comparing two indifference curves, it is always possible to find consumption combinations on the higher indifference curve that have more of both goods than any particular point on the lower indifference curve. Consumers prefer consuming more goods rather than fewer, so they prefer the higher indifference curve because it offers more consumption of everything.
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Consider an economy with flexible exchange rates. If there are high levels of inflation in the economy, then the appropriate monetary policy would be to ________ the money supply, which will cause the ______ curve to shift ________.
A) increase; the LM; left B) decrease; the LM; right C) decrease; the LM; left D) increase; the IS; left
Federal government expenditures, as a percentage of GDP,
A) rose from 1950 to 1991, fell from 1992 to 2001, and have risen from 2001 to the present. B) rose from 1950 to 1980, fell from 1981 to 2001, and have risen from 2001 to the present. C) have fallen since the early 1950s to the present. D) rose from 1950 to 2001 and then fell from 2001 to the present. E) have risen since the early 1950s to the present.