What Does the Time Inconsistency of Policy Imply

question 42

Multiple Choice

What does the time inconsistency of policy imply?

• A) It implies that what policymakers say they will do is generally what they will do, but people don't believe them because of current policy.
• B) It implies that when people expect that inflation will be low, it is harder for the Bank of Canada to increase output by increasing the money supply.
• C) It implies people always expect more inflation than policymakers claim they are trying to achieve.
• D) It implies that the Bank of Canada coordinates its actions with elected officials.

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Definitions:

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The method through which young children learn to comprehend and express language in their early years.

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A developmental stage in children typically ranging from ages 6 to 12, characterized by significant growth in social, cognitive, and physical domains.

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A theory that likens the human mind to a computer, regarding thought and knowledge as information going through systematic processing steps.

Cognitive Development

The progression of developing and transforming cognitive capabilities, including the ability to think, reason, and comprehend.