The Lag Problem Associated with Monetary Policy Is Due Mostly

question 37

Multiple Choice

The lag problem associated with monetary policy is due mostly to

• A)the fact that business firms make investment plans far in advance.
• B)the political system of checks and balances that slows down the process of determining monetary policy.
• C)the time it takes for changes in government spending to affect the interest rate.
• D)All of the above are correct.

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Definitions:

Depreciation

A method of allocating the cost of a tangible asset over its useful life, reflecting its consumption, wear and tear, or obsolescence.

Market Value

The existing cost for acquiring or selling an asset or service in the unrestricted market.

Indefinite-Lived Intangible

An intangible asset that has no foreseeable limit on the period over which it is expected to contribute to the cash flow of a business.

Fair Value

The estimated market price of an asset or liability, reflecting the amount for which it could be exchanged in a current transaction between willing parties.