If People Believe That in the Future the Government Will

question 18

Multiple Choice

If people believe that in the future the government will have to resort to creating money to pay the interest on debt currently financed by the sale of bonds,they may

• A) try to hold less money now, pushing up the current demand for goods and services as well as the current price level.
• B) increase the demand for current government bonds, raising bond prices and reducing interest rates.
• C) reduce current consumption because they expect price levels to fall in the future as the government is forced to lower taxes.
• D) increase their current holdings of government bonds because they expect interest rates on government bonds to rise.
• E) do any of the above since government deficits have an unpredictable impact on the economy.

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Definitions:

Achondroplasia

A genetic disorder affecting bone growth, leading to dwarfism characterized by short limbs, a normal-sized torso, and an enlarged head.

Epiphyses

The rounded end parts of a long bone, which grow separately from the shaft during development and later fuse to it.

Cartilage

A flexible, connective tissue found in areas in the bodies such as the joints and the rib cage.

Inflammation

The body's response to injury or infection, often causing redness, warmth, swelling, and pain.