Suppose There Is a Fiscal Expansion in the Current Period

question 55

Multiple Choice

Suppose there is a fiscal expansion in the current period. This fiscal expansion will tend to cause a smaller increase in current output when:

• A) an increase in the current interest rate causes expectations of expansionary monetary policy in the future.
• B) an increase in the current interest rate causes an increase in expected future interest rates.
• C) an increase in current output causes an increase in expected future output.
• D) Both A and B.
• E) Both B and C.

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