If the United States experiences an inflationary episode in which prices of goods and services rise faster than incomes, budget lines for U.S. consumers will
A) pivot inward.
B) pivot outward.
C) shift inward.
D) shift outward.

Question

Quizplus · Accepted Answer

When prices of goods and services rise faster than incomes, consumers' purchasing power decreases, meaning they can afford less with the same amount of income. This scenario is represented by a budget line shifting inward, indicating a reduction in the combination of goods and services a consumer can purchase.

If the United States Experiences an Inflationary Episode in Which