A) GNPrefers to productiow factors no matter where they are located. GNP is alwa

Question

A) GNPrefers to productiow factors no matter where they are located. GNP is always bigger than GDP. GDP refers to production within the nation while GNP refers to pro factors no matter where they are located. D) All of the above are true. Chapter 2 (Questions) Answer the question(s) below based on the following diagram. 500 1000 1 . Refer to the above figure, the relative price of S to T (PP*) is A) 500 B) 1/2 C) 1000 D) 2 2. If the relative price of T were to increase, then the price line would A) shift out in a parallel fashion B) shift in a parallel fashion become steeper become flatter

Explanation / Answer

1. From the given curve, we can say that;

Cost of consuming 1000 units of S = Cost of consuming 500 units of T

1000 x PS = 500 x PT

PS/PT = 500/1000

PS/PT = 1/2

Answer is B) 1/2

2. Increase in price of T decreases consumption of T and thus budget line pivot inwards keeping X-axis constant.

It means budget line becomes flatter.

Answer is D) become flatter.

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