Harry owns a hot dog stand near campus. When a pizza stand opens next to Harry's hot dog stand, he finds that he has to lower the price of his hot dogs in order to attract the same number of customers. Explain why this is the case
Customers view the hot dogs and pizza as substitute goods. The demand for Harry's hot dogs falls as some
customers choose pizza instead of hot dogs.
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If government spending and the price level increase, then
A) the interest rate decreases, consumption increases, and investment spending increases. B) the interest rate decreases, consumption declines, and investment spending declines. C) the interest rate increases, consumption declines, and investment spending declines. D) the interest rate increases, consumption increases, and investment spending increases.
Equilibrium real GDP rises after the dollar strengthened. From this, we can conclude that
A) the increase in aggregate demand was greater than the decrease in aggregate supply. B) the decrease in aggregate demand was less than the increase in aggregate supply. C) the decrease in aggregate demand was more than the increase in aggregate supply. D) the increase in aggregate demand was less than the decrease in aggregate supply.