Assume Individuals Consider Only the Long Run Effects of Changes

question 32

Multiple Choice

Assume individuals consider only the long run effects of changes in future macro variables when forming expectations of future output and future interest rates.Suppose individuals expect future government spending to decrease.Given this information,individuals will expect

• 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:

Motivated

Having a strong desire or willingness to act and achieve specific goals.

Commercial

Relating to or engaged in commerce; intended for or pertaining to the selling and buying of goods and services.

Source Credibility

The perceived trustworthiness, expertise, and reliability of the source of information.

National Crime Statistics

Data collected and analyzed at the national level that provides information on the incidence, types, and trends of crimes committed in a country.