A usual assumption in real business cycle models is that the economy is populated by a group of identical individuals and the behavior of the group can then be explained in terms of the behavior of one individual, called a(n)

The aggregate production function

A) measures the productivity of labor as leisure decreases. B) increases only with increases in productivity. C) shows that real GDP can increase because of increased productivity as well as increased labor hours. D) cannot show the impacts of productivity improvements.

Marginal utility theory predicts that an increase in income means that the consumption of

A) all goods will increase. B) normal goods will increase and consumption of inferior goods will decrease. C) inferior goods will increase and consumption of normal goods will decrease. D) None of the above answers is correct.