There Is an Adverse Supply Shock

question 18

Multiple Choice

There is an adverse supply shock.In response the Federal Reserve pursues an expansionary monetary policy.Taking into account both the shock and the Federal Reserve's policy,which of the following are we sure of?

• A)unemployment will be higher
• B)unemployment will be lower
• C)inflation will be higher
• D)inflation will be lower

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Definitions:

Internal Rate

A variation of the Internal Rate of Return (IRR), focusing on the rate at which a series of cash flows would result in a net present value of zero.

Payback Period

The length of time it takes for an investment to generate cash flows sufficient to recover its initial cost.

Payback Period

The length of time it takes for an investment to recover its initial outlay in terms of profits or savings, used as a measure of investment risk.

Cash Operating Expenses

Costs directly associated with the operation of a business that require cash payment, excluding non-cash expenses such as depreciation.