Which of the Following Statements Is Correct Regarding the Lags

question 42

Multiple Choice

Which of the following statements is correct regarding the lags in fiscal and monetary policy?

• A) The inside lag is the time needed for monetary policy to be effective while the outside lag is the time needed for fiscal policy to be effective.
• B) The outside lag is the time needed for monetary policy to be effective while the inside lag is the time needed for fiscal policy to be effective.
• C) The lag for monetary policy is shorter than the lag for fiscal policy.
• D) The lag for fiscal policy is shorter than the lag for monetary policy.

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Definitions:

Option's Value

The intrinsic and extrinsic value of an options contract, which determines its worth at a given point in time.

Black-Scholes Option Pricing Model

A mathematical model used to estimate the price of European-style options, incorporating factors such as volatility and time to expiration.

Continuous Compounding

The mathematical limit reached when an investment's interest is calculated and added back to the principal at an infinite number of intervals.

Put-Call Parity

A principle in options pricing that defines the relationship between the price of European put and call options with the same strike price and expiration.