Suppose Current Government Spending Increases AND That Individuals Expect Future

question 63

Multiple Choice

Suppose current government spending increases AND that individuals expect future government spending to increase.Given this information,in which of the following cases will output in the current period be more likely to decrease?

• A)individuals consider only the short run effects of changes in future macro variables when forming expectations of future output and future interest rates.
• B)individuals consider only the medium run effects of changes in future macro variables when forming expectations of future output and future interest rates.
• C)individuals consider only the long run effects of changes in future macro variables when forming expectations of future output and future interest rates.
• D)the output effects will be the same in B and C

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Definitions:

Meaningful Units

Fundamental components of language or information that carry significance and help in understanding the whole.

George Miller

A psychologist best known for his theory that the average number of objects an individual can hold in short-term memory is 7 ± 2.

Magic Number

A concept in cognitive science referring to the short-term memory capacity of about seven items (plus or minus two).

Auditory Traces

Memory traces of auditory information that are believed to persist in the brain for a brief period after the auditory stimulus has ended.