The New Classical Model Implies That Substitution of Debt for Tax

question 60

Multiple Choice

The new classical model implies that substitution of debt for tax financing

• A) increases aggregate demand and exerts an expansionary effect on real output.
• B) is highly effective against inflation.
• C) reduces savings because it increases both the current and future tax liability of households.
• D) leaves wealth, and therefore aggregate demand, unchanged because the debt will require higher future tax rates.

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Definitions:

Probability Sampling

A sampling technique in which every member of the population has a known and non-zero chance of being selected.

Simple Random Sampling

A method of selecting a sample from a population in which every member has an equal chance of being chosen.

Purposive Sampling

A non-random sampling technique where subjects are selected based on specific characteristics or qualities, targeting a particular segment.

Snowball Sampling

A non-probability sampling technique where existing study subjects recruit future subjects from among their acquaintances, often used in studies with hard-to-reach populations.