In the classical model, beginning from an equilibrium in which the government is running a budget surplus,
a. this will lower the wage rate
b. the demand for loanable funds will be horizontal
c. an increase in government spending will crowd out more than an equal amount of private spending
d. an increase in government spending will crowd out an equal amount of private spending
e. an increase in government spending will crowd out less than an equal amount of private spending
D
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Refer to Figure 24-1. Ceteris paribus, a decrease in the value of the domestic currency relative to foreign currencies would be represented by a movement from
A) AD1 to AD2. B) AD2 to AD1. C) point A to point B. D) point B to point A.
Which of the following occurs as the economy moves rightward along a given IS curve?
A) A reduction in the interest rate causes investment spending to decrease. B) A reduction in the interest rate causes money demand to increase. C) A reduction in the interest rate causes a reduction in the money supply. D) An increase in government spending causes a reduction in demand for goods. E) A reduction in taxes causes a reduction in demand for goods.