In September 2022, the UK government announced a reduction in future taxes to be implemented in 2023. Assume that the current interest rate did not change. Which of the following is correct? (Pick the best answer)

Question

Answer

If expected future output decreases and expected future interest rates increase, then current output may decrease, but not necessarily.

Answer

a., b. and d. are correct.

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If expected future output increases and expected future interest rates do not change, then current output should increase.

Answer

If expected future output decreases and expected future interest rates increase, then current output will decrease.

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If expected future output increases and expected future interest rates increase, then the change in current output is ambiguous.

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In September 2022, the UK government announced a reduction in future taxes to be...

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