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:

Reversing Entry

An accounting entry made at the beginning of an accounting period to reverse or cancel out a previous adjusting entry.

Adjusting Entry

A journal entry made at the end of an accounting period to allocate revenues and expenses to the period in which they actually occurred.

Net Income

The amount of profit that remains after all operating expenses, interest, taxes, and dividends have been subtracted from total revenues.

End-of-period Spreadsheet

A document or report summarizing the financial status of a company at the end of a fiscal period, including assets, liabilities, and equity.