A constant marginal rate of substitution between two goods implies that they are

The classical model uses the assumption that

A) all wages and prices are flexible. B) interest rates are not flexible. C) monopoly is widespread in the economy. D) economic markets are fragile and have no tendency to move towards an equilibrium.

Suppose fiscal policy makers implement a policy to reduce the size of a budget deficit. Based on the IS-LM model, we know with certainty that the following will occur as a result of this fiscal policy action

A) Investment spending will decrease. B) Investment spending will increase. C) There will be no change in investment spending. D) Investment spending may increase, decrease, or not change. E) none of the above