According to Mainstream Economists, the Fed's Adherence to a Traditional

question 39

Multiple Choice

According to mainstream economists, the Fed's adherence to a traditional monetary rule rather than to discretionary monetary policy is likely to

• A)reduce the severity of business cycles.
• B)increase the amount of instability in the economy.
• C)increase the rate of inflation.
• D)crowd out much-needed investment spending during times of rapid inflation.

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Definitions:

Desired Rate of Return

The return a investor expects to achieve from an investment.

Net Present Value

The difference between the present value of cash inflows and the present value of cash outflows over a period of time, used in capital budgeting to assess the profitability of investments.

Manufacturing Machinery

The equipment and machines used in the process of producing goods in manufacturing facilities.

Future Cash Flows

Estimates of future financial transactions that involve the inflow or outflow of money from a particular operation or investment.