To Make Forward Guidance Work

question 31

Multiple Choice

To make forward guidance work

• A)the central bank must follow through on its promises.
• B)it is important that the central bank surprise the public.
• C)fiscal policy must support monetary policy.
• D)the central bank must not follow through on its promises.
• E)consumers cannot be forward-looking.

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Definitions:

EAC

Equivalent Annual Cost, a method used to compare the cost effectiveness of different investments or projects with uneven lifespans.

CCA Class

Refers to the Canada Revenue Agency's categorization of depreciable properties for the purpose of determining their depreciation rate for tax purposes.

Discount Rate

The interest rate used in discounted cash flow (DCF) analysis to determine the present value of future cash flows, reflecting the time value of money and risk.

NPV

Net Present Value: a capital budgeting technique that assesses the profitability of a proposed investment or project.