1. According to the classical view, which of the following statements is true?

A) Fiscal policy can change output but not employment.

B) Fiscal policy cannot change real output or employment.

C) Fiscal policy can change employment but not output.

D) All of these answers.

E) All of these answers.

2. The key critical assumption in the classical model is that

A) fiscal policy is ineffective.

B) markets clear.

C) output and income are equal.

D) the government is running a budget deficit.

E) the budget deficit does not depend on the interest rate.

3. Say's law tells us that

A) markets clear.

B) total spending is equal to total output.

C) total income is equal to total output.

D) the budget deficit is equal to household saving.

E) investment spending is equal to household saving.

4. The government's budget deficit is equal to

A) government purchases minus total taxes.

B) government purchases plus total taxes.

C) government purchases minus transfer payments.

D) government purchases plus investment spending minus total taxes.

E) government purchases minus the difference between total taxes and transfer payments.

5. Which of the following is a leakage in the macro economy?

A) Household saving

B) Consumption spending

C) Investment spending

D) Government spending

E) None of these answers