Policy Is Conducted by Rule If Policymakers

question 71

Multiple Choice

Policy is conducted by rule if policymakers:

• A) announce in advance how policy will respond to various situations and commit themselves to following through on this announcement.
• B) are free to size up the situation case by case and choose whatever policy seems appropriate at the time.
• C) set policy according to election results, i.e., set policy by rule of the ballot box.
• D) manipulate policy to ensure both low inflation and unemployment on election day.

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Definitions:

Expected Dividend

The dividend payment a shareholder anticipates receiving, based on the company's past dividend history or announcements.

Weighted Average Cost of Capital (WACC)

A calculation of a firm's cost of capital where each category of capital is proportionately weighted, used to assess the average rate a company is expected to pay to its security holders.

Cost of Equity

The return a company requires to decide if an investment meets capital return requirements, often estimated using the Capital Asset Pricing Model (CAPM).

Pre-Tax Cost of Debt

The rate of return that a company pays on its debt, before taking into account tax deductions.