Suppose Current Government Spending Increases and That Individuals Expect Future

question 56

Multiple Choice

Suppose current government spending increases and that individuals expect future government spending to increase. Given this information, in which of the following cases will output in the current period be more likely to decrease?

• 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 A and B.
• E) The output effects will be the same in B and C.

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Definitions:

Message Framing

The presentation of information and messages in a way that influences how people understand and respond to it.

Equal Opportunity

The principle that all individuals should have the same chances to succeed, without discrimination based on race, gender, or other personal characteristics.

Reverse Discrimination

A phenomenon where affirmative action intended to redress discrimination inadvertently causes discrimination against majority or non-targeted groups.

Threat Message

Communication that warns of potential harm, encouraging individuals to take action to avoid negative consequences.