Assume Individuals Consider Only the Short-Run Effects of Changes in Future

question 70

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.A permanent increase in the money supply,with no other policy change implemented or anticipated,will most likely cause

• A)an increase in the current interest rate.
• B)an increase in future output and an increase in the future interest rate.
• C)an unknown effect on the current interest rate.
• D)all of the above
• E) none of the above

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Definitions:

Cash Payments

Transactions that involve the outlay of cash by a business for various purposes, including expenses, acquisitions, or debt repayments.

Cost of Goods Sold

The direct costs attributed to the production of the goods sold by a company, including materials and labor.

Accounts Payable

A liability to a creditor, carried on an open account, usually for purchases of goods and services.

Indirect Method

A way of reporting cash flows from operating activities in the cash flow statement by adjusting net income for changes in non-cash accounts.