Assume individuals consider only the long run effects of changes in future macro variables when forming expectations of future output and future interest rates. Suppose individuals expect future government spending to decrease. Given this information, individuals will expect
A) a reduction in the expected future interest rate and no change in expected future output.
B) a reduction in the expected future interest rate and an increase in expected future output.
C) a reduction in the expected future interest rate and a reduction in expected future output.
D) a reduction in the expected future interest rate and an ambiguous effect on expected future output.
B
You might also like to view...
A utility-maximizing consumer is currently spending all of his/her income on two products, A and B. The MU of the last unit of A consumed is 50, the price of A is $25, and the price of B is $10 . The MU of the last unit of B consumed is
a. 50 b. 5 c. 2 d. 20 e. 100
Refer to the information provided in Figure 3.11 below to answer the following question(s).
Figure 3.11Refer to Figure 3.11. An increase in the wage rate of gardenburger makers will cause a movement from Point B on supply curve S2 to
A. Point C on supply curve S2. B. supply curve S3. C. Point A on supply curve S2. D. supply curve S1.