According to the classical model,an increase in government purchases will
A) lead to a change in the interest rate that encourages consumers to spend more
B) lead to a change in the interest rate that encourages private businesses to invest more
C) discourage private spending by increasing the price level
D) be partially offset by a decline in consumption and investment spending
E) leave total spending and output unchanged

Question

Quizplus · Accepted Answer

In the classical model, the economy is always at full employment, so an increase in government purchases will not change total spending and output, as any increase in government spending will be offset by a decrease in private spending.

According to the Classical Model,an Increase in Government Purchases Will