In a classical model with fixed factors of production and flexible prices, the amount of consumption spending depends on , the amount of investment spending depends on , and the amount of government spending is determined .
A)the interest rate; disposable income; by tax revenue
B)the real wage; the real rental price of capital; by factor prices
C)labor's share of output; capital's share of output; by the interest
D)rate disposable income; the interest rate; exogenously

Question

Quizplus · Accepted Answer

In a classical model with fixed factors of production and flexible prices, consumption spending is assumed to depend on disposable income, investment spending is assumed to depend on the interest rate, and government spending is assumed to be exogenously determined (i.e. independent from any economic factors).

In a Classical Model with Fixed Factors of Production and Flexible