Consider a Classical economy where the policy maker would prefer to maintain the current interest rates and output. Suppose the economy were to experience a sudden increase in workers retiring from the labor force.

the Classical policy maker was forced to act.For which policy would they likely advocate?

1. an increase in government spending to offset the fall in output
2. an increase in taxes to offset the rise in interest rates
3. an increase in the money supply to offset the rise in interest rates
4. a decrease in government spending to offset the rise in interest rates
5. .an increase in the money supply to offset the fall in output