Assume Individuals Consider Only the Short- Run Effects of Changes

question 8

Multiple Choice

Assume individuals consider only the short- 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 increase. Given this information, individuals will expect:

• A) an increase in the expected future interest rate and no change in expected future output.
• B) an increase in the expected future interest rate and an increase in expected future output.
• C) an increase in the expected future interest rate and a decrease in expected future output.
• D) an increase in the expected future interest rate and an ambiguous effect on expected future output.
• E) an increase in the expected future interest rate and a constant expected future output.

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Definitions:

Dreaming

A series of thoughts, images, and sensations occurring in a person's mind during sleep, often representing unconscious desires and conflicts.

EEG Pattern

The recorded electrical activity of the brain, shown as wave patterns, used to diagnose and monitor neurological conditions.

Non-REM Stage

A period of sleep that encompasses all sleep stages except REM (Rapid Eye Movement) sleep, characterized by slower brain waves and reduced body activity.

Vivid

Describes something that is producing powerful feelings or strong, clear images in the mind due to being bright, detailed, or exceptional in quality.