The classical model predicts that, in the short-run, a tax cut financed by an increase in the money supply would
a. leave output and the price level unchanged.
b. increase the price level but leave output unchanged.
c. increase output but and reduce the price level.
d. increase output and the price level by increasing aggregate demand.
e. None of the above.
B
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The above figure shows the supply curves in four different markets. If each of the markets has an identical downward sloping demand curve and the same tax is levied on suppliers, which market would produce the smallest amount of deadweight loss?
A) A B) B C) C D) D E) A and D
A rise in the expected future exchange rate will tend to cause, other things the same ________
A) a depreciation of the domestic currency B) no effect on the value of the U.S. dollar in the short-run C) an appreciation of the domestic currency D) no effect on the value of the U.S. dollar