The Great Moderation Consensus Regarding the Use of Monetary or Fiscal

question 88

Multiple Choice

The Great Moderation consensus regarding the use of monetary or fiscal policy to reduce unemployment in the long run is that:

• A) unemployment can be constantly decreased as long as expectations of inflation are kept low.
• B) the natural rate of unemployment limits what monetary and fiscal policy can accomplish.
• C) the concept of the nonaccelerating inflation rate of unemployment, or NAIRU, was a mistake.
• D) the only effective policy is to maintain a constant growth rate of the money supply.

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Definitions:

Operating Cash Flow

The cash generated from the normal operating activities of a business over a specific period.

CCA Class

A category within the Capital Cost Allowance system in Canada that groups depreciable assets based on their type and the rate at which they can be depreciated for tax purposes.

Interest and Taxes

Interest and taxes are financial charges: interest is the cost of borrowing money, while taxes are mandatory contributions levied by governments on individuals and corporations.

NPV

Net Present Value (NPV) is a method used in capital budgeting to evaluate the profitability of an investment or project, by calculating the difference between the present value of cash inflows and outflows.