Assume Individuals Consider Only the Short- Run Effects of Changes

question 31

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 policymakers announce a reduction in future government spending. Which of the following will occur as a result of this expected government spending reduction?

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

---

Definitions:

Live Streaming Video

Real-time video content transmitted over the internet as it happens.

United Crisis

A term that could imply a situation of crisis uniting people or organizations towards a common goal, although not a widespread key term.

Social Media

Digital platforms that enable users to create content, share experiences, and engage in social networking.

CEO Response

A reply or statement from a Chief Executive Officer, particularly in response to a crisis, question, or public relation matter.