The points along the demand curve represent the maximum willingness of consumers to purchase a product

Using the concept of income and substitution effects, explain how you might react to each of the following:

(a) You currently work 20 hours a week at $10 per hour and your employer tells you he must reduce your wage to $8 per hour. (b) The price of pizza doubles and the price of hamburgers remains constant.

According to the rational expectations approach , if policy makers consistently stimulate aggregate demand when real output falls below the economy's potential output, then people will not be able to anticipate the effects of this policy on the price level, unemployment, and the real output level

a. True b. False Indicate whether the statement is true or false