New classical economists stress that an increase in government expenditures financed by borrowing rather than taxes will
A) exert a strong expansionary impact on aggregate demand and real output.
B) affect the timing of taxes but not their magnitude.
C) lead to higher interest rates.
D) undermine confidence and reduce the level of private saving.

Question

Quizplus · Accepted Answer

New classical economists argue that government borrowing affects the timing of taxes, as future taxes will need to be raised to pay off the debt, but it does not change the overall magnitude of taxes in the long run.

New Classical Economists Stress That an Increase in Government Expenditures