Assume Individuals Consider Only the Short- Run Effects of Changes

question 31

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 policymakers announce a reduction in future government spending. Which of the following will occur as a result of this expected government spending reduction?

• A) A decrease in the expected future interest rate and no change in expected future output.
• B) A decrease in the expected future interest rate and an increase in expected future output.
• C) A decrease in the expected future interest rate and a decrease in expected future output.
• D) A decrease in the expected future interest rate and an ambiguous effect on expected future output.
• E) A decrease in the expected future interest rate and a constant expected future output.

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Definitions:

Milgram's Study

A psychological experiment conducted by Stanley Milgram, which measured the willingness of study participants to obey an authority figure who instructed them to perform acts conflicting with their personal conscience.

Masculinity

A set of attributes, behaviors, and roles often associated with boys and men, as defined culturally and socially.

Immoral Act

An action that is considered to be wrong or unethical according to societal standards or moral principles.

Authority

The power or right to give orders, make decisions, and enforce obedience, often derived from a position of trust or leadership.