To Deal with the Time Inconsistency Problem Associated with Monetary

question 45

Multiple Choice

To deal with the time inconsistency problem associated with monetary policy, some have suggested that:

• A) the central bank implement expansionary monetary policy prior to election years.
• B) the contract of the central bank governor be reviewed regularly by the parliament.
• C) elected officials should have a direct influence on the implementation of monetary policy.
• D) the head of the central bank be chosen by election.
• E) the central bank be made more independent.

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Definitions:

Accrued Expense

Expenses that have been incurred but not yet paid or recorded in the financial statements, reflecting obligations that a business has taken on.

Net Income

The total revenue of a company minus all expenses and taxes; a measure of the company's profitability over a specific time period.

Liabilities

Financial obligations or debts that a company owes to others, reflected on the balance sheet.