In the New Classical Model, a $100 Billion Increase in Government

question 54

Multiple Choice

In the new classical model, a $100 billion increase in government purchases financed by borrowing will

• A) increase the real interest rate, which will crowd out private spending.
• B) lead to a $100 billion increase in real GDP.
• C) lead to a $400 billion increase in real GDP if the marginal propensity to consume is three-fourths.
• D) leave the interest rate, aggregate demand, and real output unchanged.

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Definitions:

Monarch Butterflies

A species of butterfly known for its striking orange and black wings and remarkable long-distance migration from North America to central Mexico.

Light-sensitive Clock

A biological mechanism in organisms that allows them to respond to the timing and duration of light, influencing their behavior and physiology.

Antennae

Sensory appendages on the heads of insects and some other arthropods, used for sensing the environment, including smells and sounds.

Butterflies

Insects of the order Lepidoptera, characterized by their colorful wings and the role they play in pollination and as indicators of ecosystem health.