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 future taxes to decrease. Given this information, individuals will expect
A) an increase in the expected future interest rate and no change in expected future output.
B) an increase in the expected future interest rate and an increase in expected future output.
C) an increase in the expected future interest rate and a reduction in expected future output.
D) an increase in the expected future interest rate and an ambiguous effect on expected future output.
A
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If there are an estimated 20,000 barrels of unknown reserves of oil, annual consumption of oil is 800 barrels, and it is estimated that the supply of oil will be depleted in 50 years, how many barrels of known reserves of oil are there estimated to
be, all else equal? A) 1,250 B) 16,000 C) 20,000 D) 320,000
Self-correcting mechanism reveals that
A. real wages will increase if there is an increase in price. B. nominal wages will fall if there is inflationary gap. C. nominal wages will increase if there is recessionary gap. D. in the long run economy will be in equilibrium at potential GDP.
If your income rises by one percent and, as a result, you buy more steak, then steak is a(n)
A) substitute. B) normal good. C) complement. D) inferior good.
Refer to Figure 9.9. At free trade, domestic consumption is
A) 5500; domestic production is 1000; imports are 4500. B) 5000; domestic production is 2000; imports are 3000. C) 4000; domestic production is 4000; imports are 0. D) 2000; domestic production is 5000; imports are 3000. E) 1000; domestic production is 5500; imports are 4500.