In the above figure, income is $8, the price of a soft drink is $1, and the initial price of a milkshake is $2. If the price of a milkshake decreases to $1, the substitution effect is the movement from point ________ to point ________

If the marginal total cost when moving from Option A to Option B is negative and the marginal total cost when moving from Option B to A is positive, which of the two options is better? What is the underlying principal behind the decision?

What will be an ideal response?

Using the aggregate supply and demand model, assume the economy is operating along the intermediate portion of the aggregate supply curve. An increase in the money supply will increase the price level and:

a. lower both the interest rate and real GDP. b. raise both the interest rate and real GDP. c. lower the interest rate and raise GDP. d. raise the interest rate and lower real GDP.