An equal proportional increase in money income and all money prices will
A)shift the budget line to the left parallel to the original budget line.
B)shift the budget line to the right parallel to the original budget line.
C)leave the position of the budget line unchanged.
D)rotate the budget line inward from the vertical axis.
E)rotate the budget line inward from the horizontal axis.

Question

Quizplus · Accepted Answer

If there is an equal proportional increase in money income and all money prices, then the relative prices (i.e. the prices of goods in terms of other goods) will remain unchanged. Therefore, the position of the budget line (which represents the various combinations of goods that can be purchased at different prices) will also remain unchanged.

An Equal Proportional Increase in Money Income and All Money