According to the New Classical View, Budget Deficits Will

Multiple Choice

According to the new classical view, budget deficits will

A) cause real interest rates to rise, which will decrease aggregate demand, output, and employment.
B) lead to an expansion in spending, which will stimulate both real output and employment.
C) fail to stimulate aggregate demand because people will save more in order to pay the higher future taxes implied by the expansion in government debt.
D) lead to inflation because the deficits expand the money supply.