According to the Spending Allocation Model, Which of the Following

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.