Using Figure 1 above, if the aggregate demand curve shifts from AD1 to AD2 the result in the long run would be:

The fact that more women have chosen to work as real wages rise is evidence that, for them

a. leisure is an inferior good. b. income and substitution effects of higher real wages work in the same direction. c. income and substitution effects of higher real wages may work in opposite directions. d. income and substitution effects may work in opposite directions but that the substitution effect is stronger.

Assume that the government increases spending and finances the expenditures by borrowing in the domestic capital markets. If the nation has highly mobile international capital markets and a flexible exchange rate system, what happens to the GDP Price Index and current international transactions in the context of the Three-Sector-Model?

a. The GDP Price Index rises, and current international transactions become more negative (or less positive). b. There is not enough information to determine what happens to these two macroeconomic variables. c. The GDP Price Index rises, and current international transactions become more positive (or less negative). d. The GDP Price Index and current international transactions remain the same. e. The GDP Price Index falls, and current international transactions become more negative (or less positive).