In an imaginary economy, consumers buy only sandwiches and magazines. The fixed basket consists of 20 sandwiches and 30 magazines. In 2006, a sandwich cost $4 and a magazine cost $2 . In 2007, a sandwich cost $5 . The base year is 2006 . If the consumer price index in 2007 was 125, then how much did a magazine cost in 2007?

According to the law of supply, when prices increase,

a. demand increases b. quantity demanded increases c. supply increases d. quantity supplied increases

According to the interest rate effect, an increase in the price level, if other factors are held constant, will lead to

A) a reduction in total real spending on interest-rate-sensitive goods. B) an increase in the stock of real wealth held by the public. C) an outward shift of the aggregate demand curve. D) an increase in the real interest rate.