Suppose Current Government Spending Increases and That Individuals Expect Future

question 49

Multiple Choice

Suppose current government spending increases and that individuals expect future government spending to increase. Given this information, in which of the following cases will output in the current period be more likely to increase?

• A) Individuals consider only the short- run effects of changes in future macro variables when forming expectations of future output and future interest rates.
• B) Individuals consider only the medium- run effects of changes in future macro variables when forming expectations of future output and future interest rates.
• C) Individuals consider only the long- run effects of changes in future macro variables when forming expectations of future output and future interest rates.
• D) The output effects will be the same in A and C.
• E) The output effects will be the same in B and C.

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Definitions:

Divorce Rates

The statistic representing the number of divorces that occur in a given population during a specified period of time.

Wife's Age

The chronological age or number of years since the birth of an individual's spouse.

Emotional Problems

Difficulties in managing and expressing feelings, which often lead to psychological distress or behavioral issues.

Occupational Attainments

The achievements or progress individuals make in their careers or job positions over time.