Suppose individuals now believe that there will be an increase in the future expected interest rate. This increase in the expected future interest rate will cause which of the following to occur in the current period?
A) an upward shift of the LM curve
B) a leftward shift of the IS curve
C) the IS curve to become flatter
D) the LM curve to become steeper
E) none of the above
B
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Changes in stock prices
A) do not affect people's wealth and their willingness to spend. B) affect firms' decisions to sell stock to finance investment spending. C) occur in regular patterns. D) are unimportant to decision makers.
Mainstream macroeconomics would suggest that fiscal policy:
A. Affects GDP and the price level through changes in aggregate supply B. Changes aggregate demand and GDP through the multiplier process C. Has no effect unless the fiscal policy is accompanied by changes in the money supply D. Is relatively ineffective because the outcomes are anticipated and offset