18. 22) Using classical theory, an increase in the capital stock, other things equal, would cause 22) A) output to rise and price levels to fall B) output and prices to both rise
    C) a decrease in equilibrium employment D) an increase in labor supply and output

19. 23) In the classical model; an increase in government spending funded by borowing would 23)

    1. A) increase demand for loanable funds, resulting in more consumption spending

    2. B) induce households to save more and firms to invest more.

    3. C) cause private sector spending to decrease by an amount equal to the increase in government spending

    4. D) increase aggregate demand and equilibrium output.