In a neoclassical economy, assume that the government lowers both government spending and taxes by the same amount. This causes:

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Quizplus · Accepted Answer

In a neoclassical economy, lowering both government spending and taxes by the same amount is a balanced budget change, which typically leads to a decrease in the interest rate due to reduced government borrowing. This lower interest rate encourages more investment.

In a Neoclassical Economy, Assume That the Government Lowers Both