According to the new classical view, budget deficits will
a. cause real interest rates to rise, which will decrease aggregate demand, output, and employment.
b. lead to an expansion in spending, which will stimulate both real output and employment.
c. fail to stimulate aggregate demand because people will save more in order to pay the higher future taxes implied by the expansion in government debt.
d. lead to inflation because the deficits expand the money supply.
C
You might also like to view...
The market value of downtown real estate is most basically determined by the
A) assessment of the taxing authorities. B) market value of the building already on a particular plot of land. C) use to which it is currently being put. D) uses to which people would like to put it if given a chance. E) whatever it costs to convert the land to its next best use.
One criticism of the Fed's policy of forward guidance during the recession of 2007-2009 is that it contributed to a prolonged period of abnormally low interest rates, leading to speculative bubbles in stocks or other financial assets as investors
A) delayed purchasing these assets until interest rates rose. B) chose to sell off these assets due to the low returns on investment. C) borrowed at these low interest rates to buy these assets. D) switched from investing in these assets to assets with higher risks.
The purchasing power parity (PPP) theory suggests the prices of identical items will equalize internationally. An illustration that supports this theory is the fact that the price of a McDonald's "Big Mac" is the same around the world
a. True b. False
We know that increases in population increase the market demand for various goods. The prices of those goods will increase the most if the elasticity of supply is
a. very large b. equal to one c. greater than 3 d. very small e. finite