Suppose a Candidate for Prime Minister Makes a Statement in a Debate

question 38

Essay

Suppose a candidate for Prime Minister makes a statement in a debate whereby he promises that he would encourage the Bank of Canada to permanently lower the unemployment rate to 3%.His opponents claim that this type of policy idea is mired in the 1960s and would only cause inflation.Explain what the opponent means.

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Definitions:

Estimated NPV

Estimated NPV (Net Present Value) is the calculation used to assess the profitability of an investment or project, representing the difference between the present value of cash inflows and outflows.

Certainty Equivalents

The guaranteed amount of money that a person would accept instead of taking a chance on a higher, but uncertain, amount.

Zero Risk

A theoretical state in which an investment has no risk of financial loss, though practically unachievable in the real world.

Cash Flow Estimates

Forecasts of cash inflows and outflows anticipated for a business during a particular time frame.