Assume Individuals Consider Only the Short Run Effects of Changes

question 18

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 individuals expect the central bank to pursue a monetary expansion in the future.Given this information,we know with certainty that

• A)current output and the current interest rate will both increase.
• B)current output will decrease.
• C)the current interest rate will decrease.
• D)the current output effects are ambiguous.

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Definitions:

Actual Quantity

The real or measured amount of inputs used in the production of goods or services, often compared against budgeted or standard quantities for analysis.

Standard Price

A predetermined cost assigned to materials, labor, and overhead, used in budgeting and variance analysis.

Revenue Volume Variance

This reflects the difference between actual revenue and the expected revenue that was based on the budget, often attributed to changes in sales volume.

Planned Selling Price Sep## Actual Units Sold

This represents the comparison between the pre-established price at which goods were intended to be sold and the actual number of units sold.