From the perspective of classical macroeconomic theory, an excess of aggregate spending would
A)increase aggregate output and the level of employment in the economy.
B)decrease the rate of interest and lower the level of investment.
C)increase consumption, and thus move the economy toward the full-employment level of output.
D)increase prices, wages, and interest rates, and thus reduce aggregate spending to equal the full-employment level of output.

Question

Quizplus · Accepted Answer

In classical macroeconomic theory, an excess of aggregate spending leads to higher prices, wages, and interest rates, which in turn reduces aggregate spending, bringing it back to the full-employment level of output.

From the Perspective of Classical Macroeconomic Theory, an Excess of Aggregate