According to John Maynard Keynes, A) Say's Law is always ...

[RYAN BANYAN]

According to John Maynard Keynes,
 
  A) Say's Law is always correct.
  B) prices and wages move up and down freely.
  C) effective demand determines real GDP.
  D) a free market economy automatically finds equilibrium at full employment.
  E) supply creates its own demand.

Question 2

Why does an increase in supply lead to lower prices?
 
  What will be an ideal response?

[Carliemb17]

Answer to Question 1

C

Answer to Question 2

When the supply of a good, such as computers, increases, the supply curve shifts rightward. This shift means sellers are more willing and more able to sell computers at all prices than they were before. When this change occurs, a surplus of computers breaks out. With the surplus, the law of market forces drives the price lower and thereby eliminates the surplus.