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 increase?
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.
A
You might also like to view...
The President of which of the following district banks of the Fed is perpetually present on the Federal Open Market Committee?
a. The New York Fed b. The Seattle Fed c. The Boston Fed d. The Chicago Fed e. The Atlanta Fed
Under an emissions tax program, the government sets ____; under an emissions permits program, the government sets ____
a. the price of the right to pollute; the price of the right to pollute b. the price of the right to pollute; the permitted total quantity of pollution c. the permitted total quantity of pollution; the price of the right to pollute d. the permitted total quantity of pollution; the permitted total quantity of pollution
The sum of durable goods, nondurable goods, and services equals
A) investment. B) fixed investment. C) government purchases. D) consumption. E) net exports.
Which of the following statements does not describe a perfectly competitive market?
A) A large number of firms are involved. B) Entry and exit are relatively easy. C) In the short run firms can earn profits, minimize losses, or earn a normal profit. D) Price is greater than marginal revenue.