In the classical IS-LM framework with a vertical LM curve, the government increases expenditure financed by bond issuance. Which of the following outcomes correctly describes the complete effect?

Classical LM is vertical — fixed at full-employment output (perfectly interest-inelastic money demand). Any rightward IS shift only raises the interest rate until private investment falls by exactly ΔG — 100% crowding out. Output remains unchanged. This is the classical neutrality of fiscal policy. • (C) describes the Keynesian case (upward-sloping LM) with partial crowding out. • (D) is wrong — bond issuance does NOT expand money supply unless the central bank monetises the debt.