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.
B
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If the price elasticity of supply is equal to zero and the price was to rise, the quantity supplied would:
A. decrease slightly. B. fall to zero. C. not change. D. increase.
If no foreign companies produce in a country, but many of the country's companies produce abroad, then
A. the country's GNP and GDP will tend to be equal. B. the country's GNP will tend to exceed its GDP. C. the country's GDP will tend to exceed its GNP. D. the country's GDP will tend to be equal to its domestic income.
A scatter diagram of money growth rates and inflation rates from 1982 to 2010 indicates
a. a clear direct relationship between money growth and inflation. b. a clear indirect relationship between money growth and inflation. c. no clear relationship between money growth rates and inflation. d. that inflation is always and everywhere a monetary phenomenon.
As the LM curve becomes steeper, an unexpected decrease in consumer confidence
A) will cause a relatively large increase in output and relatively large increase in the interest rate. B) will cause a relatively small increase in output and relatively small increase in the interest rate. C) is more likely to cause stock prices to rise. D) is more likely to cause stock prices to fall.