_____, the Time-Inconsistency Problem Is Eliminated

question 167

Multiple Choice

_____, the time-inconsistency problem is eliminated.

• A) When an inflation or a recession is correctly anticipated
• B) When lags associated with monetary and fiscal policy are extremely short
• C) When discretionary macro policy is replaced with fixed policy rules that are well publicized
• D) When expectations about an economy adjust very slowly
• E) When the price level in an economy adjusts over time with changes in aggregate demand

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Definitions:

Cash Basis

An accounting method where revenues and expenses are recognized only when cash is received or paid out, respectively.

Internal Rate

This term might be incomplete or unclear; however, it is possibly referring to the internal rate of return (IRR), which is a metric used in financial analysis to estimate the profitability of potential investments.

Discount Rate

The rate of return that is used to find the present value of a future cash flow.

Cash Outflows

The total amount of money being spent by a business, commonly on expenses like rent, materials, payroll, and other operational costs.