In the New Classical Model, a $100 Billion Increase in Government

question 54

Multiple Choice

In the new classical model, a $100 billion increase in government purchases financed by borrowing will

• A) increase the real interest rate, which will crowd out private spending.
• B) lead to a $100 billion increase in real GDP.
• C) lead to a $400 billion increase in real GDP if the marginal propensity to consume is three-fourths.
• D) leave the interest rate, aggregate demand, and real output unchanged.

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Definitions:

Neuritic Plaques

Accumulations of beta-amyloid protein fragments and degenerating nerve cell components, typically associated with Alzheimer's disease.

Alzheimer's Disease

A progressive neurological disorder characterized by memory loss, cognitive decline, and personality changes, ultimately leading to severe impairment and death.

Hippocampal Region

A crucial part of the brain involved in memory formation and spatial navigation, located within the temporal lobe.

Normal Aging

The natural changes and transitions in the human body and functions that occur with the passage of time, not associated with disease or disability.