Assume Individuals Consider Only the Short- Run Effects of Changes

question 42

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 current government spending increases and that individuals expect future government spending to increase. Given this information, we know with certainty that:

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

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Definitions:

Accounts Receivable

Money owed to a company by its customers for goods or services that have been delivered but not yet paid for.

Inventory

The goods and materials a business holds for the purpose of resale, production, or repair.

Best-price Requirements

Regulatory or policy stipulations that ensure consumers or buyers are getting the most favorable price available for goods or services, often seen in government procurement.

U.S. Antitrust Law

Legislation aimed at promoting competition and preventing unfair monopolies or practices that could harm consumers or market fairness.