An in-kind gift causes the budget line to:
A) shift to the right in a parallel fashion.
B) shift to the left in a parallel fashion.
C) rotate counterclockwise.
D) None of the preceding statements is correct.

Question

Quizplus · Accepted Answer

An in-kind gift, such as a food voucher or housing subsidy, does not directly increase the recipient's cash income but allows them to spend less cash on the good or service provided by the gift. This changes the slope of the budget line rather than simply shifting it parallel, as it affects the relative prices of goods for the consumer. Therefore, none of the provided statements accurately describes the effect of an in-kind gift on the budget line.

An In-Kind Gift Causes the Budget Line To