According to the new classical theory, a $50 billion increase in government expenditures financed by a $50 billion increase in the budget deficit will
A) cause real output to expand $200 billion if the marginal propensity to consume is three-fourths.
B) exert little impact on real output because higher real interest rates will crowd out private spending.
C) stimulate aggregate demand, causing prices to rise (inflation) .
D) be largely offset by a reduction in private spending because individuals will anticipate higher future taxes.
Correct Answer:
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Q2: New classical economists believe that an increase
Q3: What is the most appropriate test to
Q4: The new classical model implies that a
A)
Q5: Which of the following about fiscal policy
Q6: According to new classical economists, the most
Q7: It will be difficult to institute fiscal
Q8: Which of the following most accurately indicates
Q9: When the government levies taxes to subsidize
Q10: New classical economists stress that an increase
Q11: Public choice analysis indicates that it will
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