When Answering This Question,assume Individuals Consider Only the Medium-Run Effects

question 54

Multiple Choice

When answering this question,assume individuals consider only the medium-run effects of changes in future variables when forming expectations of future output and future interest rates Suppose policy makers announce a reduction in future government spending.Which of the following will occur as a result of this expected reduction in government spending?

• A)a reduction in the expected future interest rate and no change in expected future output
• B)a reduction in the expected future interest rate and an increase in expected future output
• C)a reduction in the expected future interest rate and a reduction in expected future output
• D)a reduction in the expected future interest rate and an ambiguous effect on expected future output

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Definitions:

Short-Form Merger

A merger process requiring less formal procedure, often used when a parent company merges with a subsidiary.

Shareholders

Individuals or entities that own shares in a corporation, giving them partial ownership and certain rights within the company.

Share Exchange

A process in which some or all of the shares of one corporation are exchanged for some or all of the shares of another corporation, and both corporations continue to exist.

Holding Company

A company whose business activity is holding shares in another company.