ECON 310 Lecture 4: Econ 310 ClassNotes, Week 2, Lecture 4, Page 2

According to Keynes, can the private sector always remove the economy frindividividual and companies will cut back on om a recessionary gap? Explain your answer.

15. (From Web Quiz) Which of the following statements is correct about the Income Effect (IE) and the Substitution Effect (SE) of a change in the price of Good X: a) If IE and SE work in the same direction, then X is an inferior good b) If IE and SE work in opposite directions, then X is a normal good c) If IE and SE work in opposite directions, then X could have downward-sloping demand * d) If IE and SE work in the same direction, then X could have upward-sloping demand e) All of a) through d) are incorrect.