In the classical model, a temporary increase in government purchases causes
A) a decrease in output and the real interest rate.
B) a decrease in output and an increase in the real interest rate.
C) an increase in output and a decrease in the real interest rate.
D) an increase in output and the real interest rate.
D
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People often complain about price gouging after a disaster such as a hurricane. Suppose the government successfully prevented price increases due to the disaster. We would expect
A) reconstruction to take longer because the quantity supplied of new materials would increase more slowly. B) reconstruction to take less time because the demand for materials would increase faster. C) reconstruction never to occur. D) reconstruction to take less time because the government could rebuild more quickly when people are not in the way.
Income elasticity has a range of
A) greater than or less than one. B) greater than or less than zero. C) greater than or less than negative one. D) less than zero but greater than one.
All solutions to market failures in markets for public goods or common resources:
A. try to force the internalization of externalities. B. are not perfect, and total surplus cannot be maximized in these markets. C. need to be accepted by the affected parties to be effective. D. must be provided by the government.
The greater the MPC is, the ___ the slope of the demand curve.
a. greater b. smaller c. It depends on the trade balance. d. The slope of the demand curve does not depend on this.