Refer to Figure 16-11. If government purchases increase by 100 ...

[Alainaaa8]

Refer to Figure 16-11. If government purchases increase by 100 billion and lead to an ultimate increase in aggregate demand as shown in the graph, the difference in real GDP between point A and point B will be
 
  A) more than 100 billion.
  B) less than 100 billion.
  C) 100 billion.
  D) There is insufficient information given here to draw a conclusion.

Question 2

Wally's Widgets currently hires 8 workers. The average product of labor is 15 widgets per day, and the marginal product of a 9th worker is expected to be 13 widgets per day.
 
  If the firm hires the 9th worker, what will happen to the average product of labor? Explain.

[KKcool]

Answer to Question 1

A

Answer to Question 2

If the firm hires the 9th worker, the average product of labor will fall. Whenever marginal product is lower than average product, average product will be falling.