People Combining the Effects of Past Policy Changes on Important

question 69

Multiple Choice

People combining the effects of past policy changes on important economic variables with their own judgment about the future effects of current and future policy changes is consistent with

• A) frictional unemployment.
• B) the rational expectations hypothesis.
• C) active policy making.
• D) passive policy making.

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Definitions:

Transaction Motive

The need to hold cash for the purpose of conducting day-to-day business operations.

Float Management

The practice of managing the time difference between the writing of a check and its clearing at the bank, aiming to optimize the use of available funds.

Small Firm

A business with a limited number of employees and revenue, often defined within specific legal frameworks based on the industry.

Sources of Float

Sources of float include the time difference between when a payment is initiated and when it is actually cleared and becomes available in a company's bank account, affecting the management of cash flow.