Suppose Individuals Expect That Interest Rates Will Fall in the Future

question 14

Multiple Choice

Suppose individuals expect that interest rates will fall in the future. Also assume that the RBA wants to prevent any change in current output. Given this goal of the RBA, the RBA should implement a policy in the current period that:

• A) shifts the IS curve leftward.
• B) shifts the IS curve leftward and the LM curve upward.
• C) shifts the LM curve downward.
• D) shifts the IS curve rightward.
• E) shifts the LM curve upward.

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Definitions:

Crankshaft

A mechanical part which translates the linear motion of pistons into rotational motion, fundamental to the functioning of an internal combustion engine.

Energy Content

The amount of energy present in a substance or system, which can be released or absorbed during a chemical or physical process.

Fuel

A substance consumed to produce energy through a chemical or nuclear reaction, commonly referring to materials used to power engines, such as gasoline or diesel.

Four-Cylinder Engine

An internal combustion engine with four cylinders arranged in a straight line, commonly found in small to medium-sized vehicles.