Suppose the economy is initially at equilibrium, in which total ...

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Suppose the economy is initially at equilibrium, in which total planned real expenditures equals real GDP. Which of the following will occur if there is an increase in autonomous investment?
 
  A) Inventories will decrease immediately and production of goods and services will increase until real GDP catches up with total planned real expenditures.
  B) Inventories will increase immediately and production of goods and services will decrease until real GDP catches up with total planned real expenditures.
  C) Inventories will not change and production of goods and services will not change either.
  D) Both inventories and production of goods and services will increase.

Question 2

Consider the market for smart phones. Which of the following shifts the demand curve rightward?
 
  A) a decrease in the price of smart phones
  B) an increase in the price of smart phones
  C) an increase in the price of land-line phone service, a substitute for smart phones
  D) an increase in the supply of smart phones
  E) a decrease in the number of smart phone buyers

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Answer to Question 1

A

Answer to Question 2

C