In the classical model
A) a decrease in aggregate demand will lead to a decrease in the price level and a decrease in real GDP.
B) changes in aggregate supply leave real GDP unchanged.
C) a decrease in aggregate demand will lead to an increase in the price level and a decrease in real GDP.
D) changes in aggregate demand affect only the price level, not real GDP.
Question 2
A 5 percent tax is going to be applied to a 100,000 tax base. What can be said about the revenue collected assuming dynamic tax analysis?
A) The total revenue will be zero.
B) The total revenue will be between 0 and 5,000.
C) The total revenue will be 5,000.
D) There is not enough information to determine what revenues will equal.
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