in this problem, consider how the theory of rational expectations will affect the predicted response to a government's attempt to boost the economy by giving citizens cash. for this problem, suppose that people have rational expectations and are not credit constrained (that is, individuals can lend and borrow freely at an interest rate of 5%). the government gives each citizen $5,000 with the intention of repaying the debt incurred by doing so via future taxation (since people have rational expectations, everyone knows this). the government faces an interest rate that may be the same as or different than that faced by its citizens. if people behave in the manner postulated in the theories of rational expectations and the permanent income hypothesis, what do people see as happening to the present value of their lifetime income, and how does overall spending change when the government faces the interest rates? you are currently in a labeling module. turn off browse mode or quick nav, tab to items, space or enter to pick up, tab to move, space or enter to drop. interest rate faced by the government spending today lifetime income 6% bin bin 4% bin bin 5% bin bin increasesmulti-use decreasesmulti-use decreasesmulti-use increasesmulti-use remains unchangedmulti-use remains unchangedmulti-use answer bank decreasesmulti-use increasesmulti-use remains unchangedmulti-use