Assume Individuals Consider Only the Medium- Run Effects of Changes

Multiple Choice

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 expansion in the future. Given this information, we know with certainty that:

A) current output will decrease.
B) the current output effects are ambiguous.
C) the current interest rate will decrease.
D) current output and the current interest rate will both increase.
E) current output will increase.