Those Who Favor an Active Approach to Policy Believe That

question 156

Multiple Choice

Those who favor an active approach to policy believe that

• A)discretionary monetary policy cannot be used to help the economy since monetary policy lags are long
• B)discretionary fiscal policy cannot be used to help the economy since fiscal policy lags are long
• C)lags associated with implementing policies are too long and unstable for discretionary policy to be effective
• D)despite the lags involved,implementing discretionary policy is preferable to inaction
• E)none of the above

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Definitions:

Capital Budgeting

The process of evaluating and selecting long-term investments compatible with the firm's goal of wealth maximization.

NPV

Short for Net Present Value, which is a financial metric used to evaluate the profitability of an investment or project, considering the time value of money.

IRR

Internal Rate of Return - a financial metric used to evaluate the profitability of potential investments, representing the discount rate that makes the net present value of all cash flows from a particular project equal to zero.

Salvage Value

The estimated residual value of an asset at the end of its useful life, often considered in depreciation calculations and asset disposal decisions.