Which of the following is true of a rise in the price of a good that is measured on the horizontal axis?
a. It causes the budget constraint to rotate outward on the horizontal axis.
b. It causes the budget constraint to rotate outward on the vertical axis.
c. It causes the budget constraint to rotate inward on the horizontal axis.
d. It causes a shift in the budget constraint.
c
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Inflation represents
A) an increase in output. B) an increase in the aggregate price level. C) an increase in the unemployment rate. D) a recession.
Suppose the cost of milk rose 100 percent from 1990 to 2010, and average prices for the economy rose 133 percent. Relative to others, people who purchased milk experienced a:
A. Lower real income as a result of the price effect. B. Higher real income as a result of the price effect. C. Lower real income as a result of the wealth effect. D. Higher real income as a result of the income effect.