When answering this question, assume individuals consider only ...

[Mollykgkg]

When answering this question, assume individuals consider only the medium-run effects of changes in future variables when forming expectations of future output and future interest rates Suppose policy makers announce a reduction in future government spending. Which of the following will occur as a result of this expected reduction in government spending?
 
  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

Question 2

Firms with ________ ratings are considered the safest.
 
  A) AAA
  B) BBB
  C) CCC
  D) BB

[mathjasmine]

Answer to Question 1

A

Answer to Question 2

A