Refer to Figure 7.1. Suppose the city passes an ordinance banning ...

[deesands]

Refer to Figure 7.1. Suppose the city passes an ordinance banning loud music, and this directly impacts Angus's legal ability to play his bagpipes. In response to this ordinance, Angus agrees to pay Dudley 225 each day to not call the police.
 
  Compared to the original scenario where there was no ordinance banning loud music, in this situation the size of the economic pie will A) shrink.
  B) not change.
  C) grow.
  D) More information is needed to determine the size of the economic pie.

Question 2

When the Fed lowers the federal funds rate, which of the following economic variables responds most rapidly?
 
  A) other short-term interest rates
  B) consumption expenditure
  C) the supply of loanable funds
  D) the long-term real interest rate
  E) the inflation rate

[hanadaa]

Answer to Question 1

B

Answer to Question 2

A