A major grocery store chain switches from bagging groceries in paper sacks to bagging them in plastic bags. As a result, the grocery chain demands more plastic bags than are available at the current market price. As a result:
a. the market price for paper sacks is likely to increase.
b. the market price for plastic bags is likely to increase.
c. the quantity of paper sacks purchased by the chain is likely to increase.
d. none of the above
Question 2
The greater the MPC:
a. the greater the fraction of an increase in AD due to an increase in government purchases that is consumption.
b. the smaller the fraction of an increase in AD due to an increase in government purchases that is consumption.
c. the greater the change in government purchases required to achieve a given change in AD.
d. none of the above
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