The Classical View Assumes That an Increase in Government Purchases

question 83

Multiple Choice

The classical view assumes that an increase in government purchases:

• A) causes the money supply to rise by the amount of the increase.
• B) is necessary to solve a recession.
• C) is offset by a decrease in private spending.
• D) raises total spending in the economy by the amount of the change in government purchases.

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Definitions:

Gold Value

Refers to the market worth of gold, which fluctuates based on economic conditions, supply, and demand.

Exchange Value

The worth of a good or service as determined by the market, or the amount of goods and services that can be exchanged for it.

Bretton Woods System

An international monetary system established in 1944 that set up fixed exchange rates anchored by the U.S. dollar, which was convertible to gold.

Pegged Exchange Rates

An exchange rate regime where a country's currency value is fixed or tied to another currency or a basket of currencies.