The Time-Inconsistency Problem in Monetary Policy Can Occur When the Central

question 30

Multiple Choice

The time-inconsistency problem in monetary policy can occur when the central bank conducts policy

• A)using a nominal anchor.
• B)using a strict and inflexible rule.
• C)on a discretionary,day-by-day basis.
• D)using a flexible,discretionary rule.

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Definitions:

Cognitive Dissonance

is a psychological phenomenon where an individual experiences discomfort due to conflicting beliefs, behaviors, or attitudes.

De-individuation

A psychological state of decreased self-evaluation and decreased evaluation apprehension causing antinormative and disinhibited behavior.

Stimulation and Crowding

The phenomenon where high levels of stimulation (from noise, people, etc.) can either energize individuals and improve performance or lead to discomfort and decreased performance, depending on context and individual differences.

Zimbardo

Philip Zimbardo, an American psychologist known for his research on social psychology, most notably the Stanford prison experiment.