According to new classical economists, what effect does financing a reduction in current taxes by government borrowing have on aggregate demand? Demand will be: A. reduced. B. increased. C. unaffected. D. increased or reduced, depending on interest rate levels. One more: Seasonal adjustment of economic data would most likely aid an analyst in interpreting the importance of a(n): A. decrease in automobile production caused by a strike by employees. B. decrease in agricultural production caused by unusually severe weather. C. increase in the growth of the money supply caused by payments of income taxes. D. decrease in the growth of the money supply caused by reductions in excess reserves in the banking system.
#1, A? If the government borrows money (issues bonds), money supply will decrease and AD will decrease? #2, C? All the other ones seem somewhat unusual and infrequent so seasonally adjusting them wouldn’t aid in interpretation?