The largest budgetary expense for a typical state or local government is

Which of the following statements is correct?

A) A change in demand or supply can only be caused by a change in price. B) A simultaneous decrease in demand and increase in supply will result in an increase in equilibrium price and uncertain effect on quantity. C) If price is currently above equilibrium, market adjustments will result in a decrease in price and quantity supplied. D) An increase in supply invariably leads to a shortage in the affected market.

Refer to Figure 10.1. If the level of real GDP is initially Y2, firms will ________ production until equilibrium is reached at ________

A) increase; Y2 B) decrease; Y2 C) increase; Y1 D) decrease; Y1