As the stock of capital grows, there will typically be ________ depreciation.

The new classical model implies that substitution of debt for tax financing

a. increases aggregate demand and exerts an expansionary effect on real output. b. is highly effective against inflation. c. reduces savings because it increases both the current and future tax liability of households. d. leaves wealth, and therefore aggregate demand, unchanged because the debt will require higher future tax rates.

Kachina is a senior majoring in graphic design at Awesome University (AU). While she has been attending college, Kachina started a computer consulting business to help senior citizens learn how to use their iPads. Kachina charges $25 per hour for her consulting services. She also works 5 hours a week for the Economics Department to maintain that department's Web page. The Economics Department

pays Kachina $20 per hour. If Kachina can work additional hours at either job, what is the opportunity cost if she spends one hour reading a novel? a. $20 b. $25 c. $100 d. $125