If all prices rise by 5 per cent and money income remains constant, the new budget line will have

Name: If all prices rise by 5 per cent and money income remains constant, the new budget line will have
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Question

Quizplus · Accepted Answer

The slope of the budget line represents the rate at which one good can be substituted for another, which is determined by their relative prices. A uniform increase in all prices by 5% does not change the relative prices of goods, hence the slope remains the same.

If All Prices Rise by 5 Per Cent and Money