Refer to the graph below. Assume the consumer has an income of $100, the price of X is $2 and the price of Y is $1. According to the graph, the substitution effect of a decrease in the price of X from $2 to $1 is equal to:  

Classical economists think that the government ________ use fiscal policy to dampen the business cycle because prices and wages adjust ________

A) should not; rapidly B) should not; slowly C) should; slowly D) should; rapidly

When there is a shift in autonomous expenditure, why is there a multiple expansion of income and real GDP? Trace the multiplier effect through the first four rounds when there is an increase in autonomous expenditure of $40 billion and the marginal propensity to consume is 0.75.

What will be an ideal response?