Assume Individuals Consider Only the Medium- Run Effects of Changes

question 33

Multiple Choice

Assume individuals consider only the medium- run effects of changes in future macro variables when forming expectations of future output and future interest rates. Suppose current government spending increases and that individuals expect future government spending to increase. Given this information, we know with certainty that:

• A) the current interest rate will increase.
• B) future expected output will increase.
• C) current output will increase.
• D) current output and the current interest rate will both increase.
• E) the expected future interest rate will increase.

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Definitions:

Large Market

A broad and extensive market segment with a significant number of potential customers.

Pattern Recognition

The automated or semi-automated process of identifying patterns, regularities, or structures within datasets.

Development Strategy

A plan or set of policies designed to achieve growth, progress, or improvement in a specific area, such as a business, community, or nation.

Alertness

The quality of being quick to notice and react to opportunities or potential threats.