The Time Inconsistency Problem Occurs When

question 129

Multiple Choice

The time inconsistency problem occurs when

• A)all of the following occur
• B)expectations are slow to adjust to reality,causing output to vary in the short run
• C)public officials' reelection goals generate short-term economic gains at the expense of long-term inflation
• D)execution lags are shorter than self-correction lags
• E)policy makers execute one type of policy after influencing the public to anticipate another type

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Definitions:

Return on Assets

A financial ratio indicating the profitability of a company relative to its total assets, measuring how effectively a company uses its assets to generate earnings.

Debt-Equity Ratio

The indicator that quantifies how much of a company's assets are financed through equity and how much through debt.

Total Equity

The total value of all ownership interests in a company, including common stock, preferred stock, and retained earnings.

Total Debt

The sum of all owed by a company, including both short-term and long-term liabilities.