According to the New Classical View, Budget Deficits Will

question 125

Multiple Choice

According to the new classical view, budget deficits will

• A) cause real interest rates to rise, which will decrease aggregate demand, output, and employment.
• B) lead to an expansion in spending, which will stimulate both real output and employment.
• C) fail to stimulate aggregate demand because people will save more in order to pay the higher future taxes implied by the expansion in government debt.
• D) lead to inflation because the deficits expand the money supply.

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Definitions:

Transference

In psychoanalysis, the process by which emotions and desires originally associated with one person are unconsciously shifted to another person.

Mate Selection

The process by which individuals choose their partners based on various factors including, but not limited to, physical attractiveness, personality traits, and socio-economic status.

Mere Exposure Effect

A psychological phenomenon where people tend to develop a preference for things merely because they are familiar with them.

Initially Disliked

Refers to a negative first impression or initial negative feelings towards a person, object, or idea.