The Existence of the Time Inconsistency Problem in Macro Policy

question 4

Multiple Choice

The existence of the time inconsistency problem in macro policy suggests which of the following?

• A) Use fiscal and monetary policy to fine tune the economy.
• B) Appoint someone who is more conservative than the rest of the government to head the central bank.
• C) Intervene frequently in the foreign exchange market.
• D) Reduce the independence of the central bank.
• E) Eliminate rational expectations from econometric models used for forecasting.

---

Definitions:

Vertical Merger

A merger between two companies that operate at different stages within the same industry supply chain, enhancing efficiency or reducing costs.

Horizontal Merger

The combination of two or more firms operating in the same industry or producing similar goods or services.

Conglomerate Merger

A transaction that combines companies operating in completely unrelated business activities into a single corporation.

Vertical Merger

The merging of two or more businesses at various phases of production or distribution within the same sector.