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Unformatted text preview: current real interest rate and expected future real interest rates are ____ related. A. negatively B. positively C. not 6. A reduction in expected future output will cause the ___ curve to shift ___. A. IS, leftward. B. IS, rightward. C. LM, upward. D. LM, downward. 7. Whether people believe that the government policy announcement is credible or not matters, because A. it affects expectations of future economic variables. B. people like the honest government. C. politicians never keep their promise. D. people are myopic in forming their expectations. 8. Discuss the effects of a reduction in budget deficits (by cutting government spending) on output in the short run. In discussing, use an IS-LM graph with correctly labeled curves and axes. If a curve shifts in a certain way, you must explain why the curve shifts that way....
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- Winter '07