If Policymakers Are Free to Analyze Events as They Occur

question 53

Multiple Choice

If policymakers are free to analyze events as they occur and choose whatever policy seems appropriate at the time, then this is:

• A) policy by rule.
• B) policy by discretion.
• C) monetary policy.
• D) fiscal policy.

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Definitions:

Expected Market Rate

The average rate of return anticipated by market participants, based on forecasts and historical trends.

Expected Rate of Return

The anticipated amount of profit or loss an investment generates, expressed as a percentage of the initial investment amount.

Covariance

A measure of the degree to which returns on two risky assets move in tandem. A positive covariance means that asset returns move together. A negative covariance means they vary inversely.