According to the Classical Model,an Increase in Government Purchases Will

question 164

Multiple Choice

According to the classical model,an increase in government purchases will

• A) lead to a change in the interest rate that encourages consumers to spend more
• B) lead to a change in the interest rate that encourages private businesses to invest more
• C) discourage private spending by increasing the price level
• D) be partially offset by a decline in consumption and investment spending
• E) leave total spending and output unchanged

---

Definitions:

Comparative Advantage

The ability of an entity to produce goods or services at a lower opportunity cost than others, which is the basis for specialization and trade.

Netherlands

A country located in Northwestern Europe, known for its flat landscape, extensive canal systems, tulip fields, windmills, and cycling routes.

Belgium

A country located in Western Europe, known for its medieval towns, Renaissance architecture, and as headquarters of the European Union and NATO.

Raising Beef

The agricultural practice of breeding and managing cattle for the purpose of producing beef for consumption.