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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 the central bank to pursue monetary contraction in the future. Given this information, we know with certainty that: Select one: Oa. current output will increase. O b. current output and the current interest rate will both decrease. O c. the current output effects are ambiguous. O d. current output will decrease. O e. the current interest rate will increase.

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 the central bank to pursue monetary contraction in the future. Given this information, we know with certainty that: Select one: Oa. current output will increase. O b. current output and the current interest rate will both decrease. O c. the current output effects are ambiguous. O d. current output will decrease. O e. the current interest rate will increase.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Please answer both questions in short sentence.

Part A) & Part B) both are homework questions related to price level and current output.

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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 the central bank to pursue monetary contraction in the future. Given this information, we know with certainty that: Select one: current output will increase. O b. current output and the current interest rate will both decrease. the current output effects are ambiguous. Oc. O d. current output will decrease. O e. the current interest rate will increase. Suppose foreign exchange markets anticipate a revaluation for country A. Further assume that policy makers in country A will continue to fix its nominal exchange rate. In order to peg the currency at its original level, which of the following must occur? Select one: a. Decrease stock prices. O b. Decrease the domestic price level. Oc. Convince trading partners to decrease their interest rates. O d. Convince trading partners to decrease their price levels. O e. Decrease the domestic interest rate.
Transcribed Image Text: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 the central bank to pursue monetary contraction in the future. Given this information, we know with certainty that: Select one: current output will increase. O b. current output and the current interest rate will both decrease. the current output effects are ambiguous. Oc. O d. current output will decrease. O e. the current interest rate will increase. Suppose foreign exchange markets anticipate a revaluation for country A. Further assume that policy makers in country A will continue to fix its nominal exchange rate. In order to peg the currency at its original level, which of the following must occur? Select one: a. Decrease stock prices. O b. Decrease the domestic price level. Oc. Convince trading partners to decrease their interest rates. O d. Convince trading partners to decrease their price levels. O e. Decrease the domestic interest rate.
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 the central bank to pursue monetary contraction in the future. Given this information, we know with certainty that: Select one: current output will increase. O b. current output and the current interest rate will both decrease. the current output effects are ambiguous. Oc. O d. current output will decrease. O e. the current interest rate will increase. Suppose foreign exchange markets anticipate a revaluation for country A. Further assume that policy makers in country A will continue to fix its nominal exchange rate. In order to peg the currency at its original level, which of the following must occur? Select one: a. Decrease stock prices. O b. Decrease the domestic price level. Oc. Convince trading partners to decrease their interest rates. O d. Convince trading partners to decrease their price levels. O e. Decrease the domestic interest rate.
Transcribed Image Text: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 the central bank to pursue monetary contraction in the future. Given this information, we know with certainty that: Select one: current output will increase. O b. current output and the current interest rate will both decrease. the current output effects are ambiguous. Oc. O d. current output will decrease. O e. the current interest rate will increase. Suppose foreign exchange markets anticipate a revaluation for country A. Further assume that policy makers in country A will continue to fix its nominal exchange rate. In order to peg the currency at its original level, which of the following must occur? Select one: a. Decrease stock prices. O b. Decrease the domestic price level. Oc. Convince trading partners to decrease their interest rates. O d. Convince trading partners to decrease their price levels. O e. Decrease the domestic interest rate.
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