A subsidy payment, even if paid entirely to the seller, will impact the price, supply of, and quantity demanded of a good

Which of the following is true in the classical model?

a. A spontaneous increase in spending can cause an increase in output and employment. b. An increase in output and employment can cause a decrease in spending. c. A spontaneous decrease in spending can cause an increase in output and employment. d. An increase in output and employment can cause an increase in spending. e. A spontaneous decrease in spending can cause a decrease in output and an increase in employment.

In response to the sharp decline in stock prices in October 1987, the Federal Reserve

a. increased interest rates, and the economy avoided a recession. b. increased interest rates, but the economy was unable to avoid a recession. c. decreased interest rates, and the economy avoided a recession. d. decreased interest rates, but the economy was unable to avoid a recession.