In the Classical Model,beginning from an Equilibrium in Which the Government

question 50

Multiple Choice

In the classical model,beginning from an equilibrium in which the government is running a budget surplus

• A) the supply of loanable funds will be horizontal
• B) an increase in government spending will cause the interest rate to rise
• C) the supply of loanable funds will be vertical
• D) an increase in government spending will crowd out less than an equal amount of private spending
• E) a decrease in government spending will crowd out less than an equal amount of private spending

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