The New Classical Model Implies That a

question 1

Multiple Choice

The new classical model implies that a

• A) budget surplus will effectively retard inflation emanating from excess demand.
• B) budget deficit will increase the real interest rate.
• C) substitution of debt for tax financing will leave aggregate demand and real output unchanged.
• D) planned budget deficit will be a highly effective tool to combat a recession.

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Definitions:

Product

Anything that can be offered to a market that might satisfy a want or need, including physical goods, services, and experiences.

Period

A length of time during which a series of events or an action takes place or is completed.

Absorption Costing

A cost calculation method within accounting that assimilates all expenses incurred during manufacturing, covering direct materials, direct labor costs, and all overheads, whether fixed or variable, into the product’s price.

Income Statement

A financial statement that shows a company's revenue and expenses over a specific period, detailing net profit or loss.