Which of the Following Explains the Time-Inconsistency of Policy Explained

question 126

Multiple Choice

Which of the following explains the time-inconsistency of policy explained by Kydland and Prescott?

• A) A contractionary monetary policy will lead to higher unemployment in the short-run but not the long-run.
• B) An expansionary monetary policy will lead to higher unemployment in the short-run but not the long-run.
• C) Expected inflation is higher than otherwise if the public believes that policymakers will be tempted to raise inflation to reduce unemployment.
• D) Expected inflation is lower than otherwise if the public believes that policymakers will be tempted to lower inflation to reduce unemployment.

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Definitions:

Groundwater Flow

The movement of groundwater through the Earth's subsurface, driven primarily by gravity and pressure differentials.

Vertical Exaggeration

The method of representing the topographical relief on maps and diagrams by increasing the elevation scale relative to the horizontal scale.

Groundwater Divide

An area elevated between two groundwater basins, directing the flow of subsurface water in opposite directions.

Hydraulic Gradient

The slope or gradient of the water table.