The decisions of firms and households are guided by prices and self-interest in a

If aggregate expenditures are lower than real GDP:

A. actual real output is less than equilibrium real output. B. aggregate output increases. C. employment increases. D. there will be unplanned increases in inventories.

The substitution effect from a rise in the price of pizza

A) leads to a movement along the fixed budget line, due to a change in relative prices. B) increases the quantity demanded of pizza. C) decreases the quantity demanded of pizza. D) Both answers A and B are correct.