The central bank of an economy announces that it will conduct monetary expansion policy (by decreasing the real interest rate) in the current period as well as in the future periods. Use the IS-LM model (with expectation) to shown the effects of this policy on the current output for the following two situations:
(1) People only take the decrease in the current period into account and do not believe the decrease in the future periods.
(2) People take the decrease in the current period into account and believe the decrease in the future periods.
