Author Question: Suppose current government spending increases and that individuals expect future government spending ... (Read 216 times)

Deast7027 · **on:** Jun 30, 2018

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.

Question 2

The labor force is defined as

A) the sum of the employed and unemployed.
B) the total number employed.
C) the total number of working age individuals in the population.
D) the sum of the number of employed, unemployed and discouraged individuals.