Forward-Looking Households May Reduce Consumption Expenditures Today If They Believe

Multiple Choice

Forward-looking households may reduce consumption expenditures today if they believe that the government is currently

A) borrowing to run a budget deficit, and to pay back these loans in the future may require higher taxes.
B) running a budget surplus, and the increase in the government's supply of money will generate inflation in the future.
C) experiencing a balanced budget, and will therefore not be implementing any fiscal policy to stabilize the economy.
D) cutting federal spending to decrease the budget deficit, which will raise the real interest rate, the inflation rate, and the unemployment rate.