What Does the Time Inconsistency of Monetary Policy Mean

question 112

Multiple Choice

What does the time inconsistency of monetary policy mean?

• A)It means that once people have formed expectations of low inflation based on a promise by the central bank, the central bank is tempted to raise inflation to lower unemployment.
• B)It means that at some times central banks think it is more important to keep unemployment low; at other times, they think it is more important to keep inflation low.
• C)It means that monetary policy is not consistent across time because it is influenced by politics.
• D)It means that monetary policy cannot be consistent across time because the rate of inflation is fluctuating.

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Definitions:

Uterine Cycle

The monthly cycle of changes in the uterus, including menstruation, in preparation for possible pregnancy.

Progesterone

A hormone released by the ovaries involved in the menstrual cycle, pregnancy, and embryogenesis of humans and other species.

Spiral Glands

The spiral glands refer to the coiled tubular glands in the endometrium that significantly contribute to the uterine lining's thickness and functionality.

FSH

Follicle-stimulating hormone, a gonadotropin involved in the development of eggs in ovaries and sperm in testes.