Assume Individuals Consider Only the Medium Run Effects of Changes

question 10

Multiple Choice

Assume individuals consider only the medium 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.
• E) current output will not change.

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Definitions:

Possible Selves

Cognitive representations of the kind of people we think we might become some day.

Construe the World

To construe the world means to interpret or understand the world and the events within it through a personal or theoretical lens.

Personal Constructs

Theoretical constructs proposed by George Kelly, suggesting that people develop personal systems of belief that they use to understand and interpret the world around them.