One Often-Cited Rationale for a Fixed-Growth-Rate Monetary Policy Is That

question 62

Multiple Choice

One often-cited rationale for a fixed-growth-rate monetary policy is that

• A)it is too expensive to pay a staff to continually make adjustments in policy
• B)although it's possible to determine what's happening in the economy,it's not possible to determine what to do about it
• C)it is not possible to determine with any certainty what's happening in the economy,so it's easy to make a mistake with active policy
• D)we know that the economy is increasing at a fixed rate year after year,so a fixed rate of growth in the money supply is justified
• E)then the Federal Reserve would be superfluous and we could eliminate one large bureaucracy

Calculate equivalent annual rates of return on investments.

Determine the effective rate of interest for different compounding periods.

Analyze and compare different interest rates to make informed financial decisions.

Comprehend the impact of changes in periodic interest rates on the effective annual rate.

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Definitions:

Required Rate

Required Rate refers to the minimum return investors expect to receive on an investment, which is influenced by the investment's risk profile and market conditions.

Credit Default Swap

A financial derivative that allows an investor to "swap" or offset their credit risk with that of another investor.

Recovery Ratio

A financial metric used to determine the amount of money recovered from an investment or project as compared to the amount invested or spent.

Notional Amount

The total principal or face value involved in a financial transaction, often used in derivatives trading.