Why can't an indifference curve be a straight line?
What will be an ideal response?
A straight-line indifference curve indicates that the consumer will always be willing to give up the same number of one good to get one more unit of another good. This is not plausible, because if the consumer consumes many units of one good and none of another good, she should be willing to give up some units of the former good to consume some of the latter good. Therefore, indifference curves must be convex to the origin.
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Figure 4.3 illustrates the demand for tacos. If people expect the price of tacos to decrease in the near future, this would most likely bring about a movement from
A) point a to point b. B) point c to point a. C) D2 to D0. D) D0 to D1.
Which of the following is false? a. The money supply will tend to rise when the Fed pays a lower interest rate on bank reserves
b. If banks never wanted to hold excess reserves, decreasing the interest rate the Fed pays on reserves would increase the money supply. c. If banks hold excess reserves, the actual money multiplier would be less than potential money expansion. d. All of the above are true