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Suppose that the price of food increases by 2%, the price of clothing increases by 4%, and food and clothing each account for half of expenditures; therefore, the overall inflation rate is 3%. A 3% increase in income is necessary to achieve the same level of utility.true/false

Answer :

Answer:

True

Explanation:

Since the overall inflation is 3%, a rise in income of 3% is necessary to balance off the rise in inflation.

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