If the price of ice cream increases substantially (ceteris paribus), the equilibrium quantity of hot fudge sauce, a complement, is likely to:
a. increase, and the equilibrium price of hot fudge is likely to decrease.
b. increase, and the equilibrium price of hot fudge is likely to increase.
c. decrease, and the equilibrium price of hot fudge is likely to decrease.
d. decrease, and the equilibrium price of hot fudge is likely to increase.
Question 2
To offset the effect of a steep fall in net exports on the economy, the government might:
a. increase government purchases.
b. decrease government purchases.
c. increase taxes.
d. none of the above.
Comparison of reactions at equilibrium and steady state
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