According to the Spending Allocation Model, Which of the Following

question 64

Multiple Choice

According to the spending allocation model, which of the following statements is correct?

• A)Tax cuts and increases in government purchases have the same effect on the economy.
• B)Tax cuts cause the real interest rate to fall and increases in government purchases cause the interest rate to rise.
• C)Tax cuts cause the real interest rate to rise and increases in government purchases cause the interest rate to fall.
• D)All else held equal, a tax cut has no effect on the nongovernment share of GDP.
• E)All else held equal, an increase in government purchases has no effect on the nongovernment share of GDP.

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