To simplify our consumption models,suppose U.S.consumers only purchase food and all other goods where food is plotted along the horizontal axis of the indifference map.If the U.S.Congress passes an economic stimulus package that pays $300 to each person,how does this affect the budget line for each consumer?
A)Makes the budget line steeper
B)Makes the budget line flatter
C)Parallel rightward shift
D)Parallel leftward shift
E)none of the above

Question

Quizplus · Accepted Answer

The $300 payment increases consumers' income, causing a parallel rightward shift of the budget line, as they can now afford more of both goods.

To Simplify Our Consumption Models,suppose U