Inflation is 14 percent. Debt is $4 trillion. The nominal deficit is $360 billion. What is the real deficit or surplus
1 answer:
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Answer:
See Explanation
Explanation:
Given
The following details are omitted from the question
--- Price of the Shoes
--- Spent on dancing
--- Budget on shoe and dancing
Solving (a): Her budget line
First, we determine her budget equation (B).
This is calculated by:
This gives:
Divide through by 50
--- The budget equation
<em>See attachment for the budget line equation</em>
Solving (a): Optimal Consumption Bundle Point
First, we determine the marginal rate of substitution (MRS) using:
This implies that:
Cross Multiply
Divide by 2
Substitute T for S in the budget equation
Recall that:
So, the point if optimal consumption bundle is (5,5)
<em>See attachment for point R</em>
