In 1975 a pocket calculator cost more than 50; in 1990 a calculator of the same quality cost less than 10 . Which of the following explanations is most consistent with these facts?
a. Intense competition in the calculator industry caused the supply curve for calculators to shift to the left, depressing the price.
b. An increase in the demand for calculators led to the price drop.
c. An improvement in technology caused the supply of calculators to increase, depressing their price.
d. As the population grew, fewer expensive calculators were needed, causing prices to fall.
Question 2
If government policy makers were worried about the inflationary potential of the economy, which of the following would not be a correct fiscal policy change?
a. Increase consumption taxes.
b. Increase government purchases of goods and services.
c. Decrease government purchases.
d. None of the above.
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