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 process of giving birth to a baby, marking the end of pregnancy and involving labor and delivery.