In the short-run, an increase in the average price level in the ...

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In the short-run, an increase in the average price level in the economy will cause:
 a. demand for a good to increase but total production to decline.
  b. profits to rise and thus, total production to increase.
  c. interest rates to fall and thus, total production to decline.
  d. input costs to fall and thus, total production to rise.
  e. input costs to fall and thus, total production to decline.

Question 2

A theory asserts that manufacturers are less willing to sell units of output as the price of a good decreases, ceteris paribus. However, as the price of computers fell throughout the 1990s, more computers were sold. Which of the following best explains the apparent conflict between theory and data?
 a. The theory must be invalid.
 b. The theory rests on assumptions that are too simplistic.
 c. It is likely that variables other than the price and quantity of computers sold were changing.
  d. All variables other than the price and quantity of computers sold were unchanged.

[Anton]

Answer to Question 1

b

Answer to Question 2

c

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TYSM

[rachel]

Gracias!