To Solve the "Time Inconsistency" Problem in Macro Policy, a Nation

question 39

Multiple Choice

To solve the "time inconsistency" problem in macro policy, a nation may well have to:

• A) present policy moves to the public, for example, in a referendum.
• B) use the courts to settle policy disputes.
• C) restrict itself in the present from taking certain policy moves in the future.
• D) lift all restrictions on future policy moves.
• E) make the central bank more responsive to the popular will.

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Definitions:

Standard Costing

A cost accounting system that uses pre-determined costs to value the cost of goods sold and assess the performance.

Labour Efficiency Variance

The difference between the actual labor hours used and the standard labor hours expected for the level of production achieved, often indicating productivity levels.

Variable Overhead

Costs that vary with the level of production output, such as utilities for a manufacturing plant, which increase with more production.

Labour Rate Variance

The difference between the actual cost of labor and its expected cost based on standards set for production.