Suppose current government spending decreases and that individuals expect future government spending to decrease. Given this information, in which of the following cases will output in the current period be more likely to increase?
A) Individuals consider only the short run effects of changes in future macro variables when forming expectations of future output and future interest rates.
B) Individuals consider only the medium run effects of changes in future macro variables when forming expectations of future output and future interest rates.
C) Individuals consider only the long run effects of changes in future macro variables when forming expectations of future output and future interest rates.
D) The output effects will be the same in B and C.
C
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When a household takes extra (unbudgeted) money on a trip, economists would classify this money as held for a(n):
a. speculative demand. b. transactions demand. c. emergency motive. d. precautionary demand. e. inflationary motive.
In accordance with the law of supply, both individual and market supply curves are drawn:
A. horizontal. B. vertical. C. downward-sloping. D. upward-sloping.