Monetary Rules Work Best When

question 62

Multiple Choice

Monetary rules work best when:

• A) the Fed loses control of the money supply.
• B) interest rates are high.
• C) money velocity is stable.
• D) inflation expectations are high.

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Definitions:

MM Propositions

The Modigliani-Miller propositions, fundamental theories in corporate finance that suggest, under certain conditions, the value of a firm is unaffected by its capital structure.

Financial Leverage

Utilizing borrowed money to enhance the possible gains from an investment.

Tax Rate

The proportion of tax that an individual or business must pay on their earnings.

ROE

Return on Equity; a measure of the profitability of a business in relation to the equity, calculated as net income divided by shareholder equity.