If an Economist Supports Targeting Inflation as Opposed to Monetary

question 32

Multiple Choice

If an economist supports targeting inflation as opposed to monetary fine-tuning,this economist probably believes that time lags in the implementation of monetary policy are

• A)short but predictable.
• B)short but unpredictable.
• C)long and unpredictable.
• D)long but predictable.
• E)predictable in their short-run effects but unpredictable in the long run.

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Definitions:

Discount Rate

The interest rate used in determining the present value of future cash flows or in evaluating the attractiveness of an investment.

Project Cash Flows

The net amount of cash that is generated or expended by a particular project or investment, after accounting for all inflows and outflows.

Project Profitability Index

The ratio of the net present value of a project’s cash flows to the investment required.

Net Present Values

refers to the calculation that determines the present value of a series of future cash flows by discounting them at a certain rate, often used for assessing the profitability of investments.