Monetary Policy Is Considered Time-Inconsistent Because

question 21

Multiple Choice

Monetary policy is considered time-inconsistent because

• A)of the lag times associated with the implementation of monetary policy and its effect on the economy.
• B)policymakers are tempted to pursue discretionary policy that is more contractionary in the short run.
• C)policymakers are tempted to pursue discretionary policy that is more expansionary in the short run.
• D)of the lag times associated with the recognition of a potential economic problem and the implementation of monetary policy.

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Definitions:

Ideal Self

The perception of what an individual aspires to be, shaped by personal goals, values, and societal expectations.

Behavioural Anchor Referent

A reference point or standard used to guide or stabilize behavior, often based on past experiences or societal norms.

Stereotype Threat

The psychological pressure experienced by individuals when they fear confirming negative stereotypes about their social group, which can impair their performance.

Anxiety

An emotion characterized by feelings of tension, worried thoughts, and physical changes like increased blood pressure, stemming from anticipation of a perceived threat.