Forward-Looking Households May Reduce Consumption Expenditures Today If They Believe

question 55

Multiple Choice

Forward-looking households may reduce consumption expenditures today if they believe that the government is currently

• A) borrowing to run a budget deficit, and to pay back these loans in the future may require higher taxes.
• B) running a budget surplus, and the increase in the government's supply of money will generate inflation in the future.
• C) experiencing a balanced budget, and will therefore not be implementing any fiscal policy to stabilize the economy.
• D) cutting federal spending to decrease the budget deficit, which will raise the real interest rate, the inflation rate, and the unemployment rate.