A country reports that unplanned inventories increased during ...

[plus1]

A country reports that unplanned inventories increased during 2012. The increase in unplanned inventories leads to
 
  A) firms decreasing production, which decreases GDP.
  B) actual aggregate expenditure being different than real GDP.
  C) consumers increasing their consumption expenditure, which increases GDP.
  D) firms increasing production, which increases GDP.
  E) the government decreasing production, which decreases GDP.

Question 2

In New State, the bottling law requires that people get a refund of five cents when they return an empty bottle or can. Why does the state pay people to return bottles? In your answer, be sure to mention the role played by rational choice.
 
  What will be an ideal response?

[T4T]

Answer to Question 1

A

Answer to Question 2

Policy makers know that people making rational choices respond to incentives. Instead of throwing away bottles and cans, people will now bring the used bottles and cans to the designated areas for recycling in order to receive their payment. Thus policy makers have taken advantage of people's rational decision making in order to reduce litter and clean the environment.