Assume Individuals Consider Only the Medium- Run Effects of Changes

question 41

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 individuals expect the central bank to pursue monetary contraction in the future. Given this information, we know with certainty that:

• A) the current output effects are ambiguous.
• B) current output will increase.
• C) the current interest rate will increase.
• D) current output will decrease.
• E) current output and the current interest rate will both decrease.

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Definitions:

Metropolitan Statistical Area

A geographical region with a relatively high population density at its core and close economic ties throughout the area, used in statistical analysis and policy making.

Urbanized Area

A densely populated area characterized by high human settlement and infrastructure such as roads, buildings, and utilities that support a city or town.

Economic Integration

The process by which different countries reduce barriers to trade and investment, making economies more closely interconnected.

Micropolitan Statistical Area

A geographic region with an urban core of at least 10,000 but fewer than 50,000 inhabitants, often used in demographic and economic analyses.