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Discuss the time inconsistency problem and explain how it relates to monetary policy.
Active Investments
Investment strategies that involve frequent transactions and monitoring by investors or fund managers with the aim to outperform market indexes.
Forecasting Errors
Discrepancies between predicted values and actual values that occur when projecting future data points or trends.
Passive Investments
Investment strategies that involve minimal buying and selling actions, typically focused on long-term appreciation and mimicking market or sector indexes.
Regret Avoidance
Notion from behavioral finance that individuals who make decisions that turn out badly will have more regret when that decision was more unconventional.
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