According to the Spending Allocation Model, Which of the Following

question 64

Multiple Choice

According to the spending allocation model, which of the following statements is correct?

• A)Tax cuts and increases in government purchases have the same effect on the economy.
• B)Tax cuts cause the real interest rate to fall and increases in government purchases cause the interest rate to rise.
• C)Tax cuts cause the real interest rate to rise and increases in government purchases cause the interest rate to fall.
• D)All else held equal, a tax cut has no effect on the nongovernment share of GDP.
• E)All else held equal, an increase in government purchases has no effect on the nongovernment share of GDP.

---

Definitions:

Legal Immigrants

Individuals who have been granted the right to live permanently in a country, following the legal requirements of immigration laws.

Family-Sponsored Immigrants

Individuals who are allowed to immigrate to a country based on family ties, including spouses, children, and other close relatives of citizens or legal residents.

Human Capital

The collective skills, knowledge, or other intangible assets of individuals that can be used to create economic value.

Wage Opportunities

The availability and scope for individuals to earn income through employment or labor in the market.