The Existence of the Time Inconsistency Problem in Macro Policy

question 23

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)Reduce the independence of the central bank.
• C)Appoint someone who is more conservative (economically)than the rest of the government to head the central bank.
• D)Intervene frequently in the foreign exchange market.
• E) Eliminate rational expectations from econometric models used for forecasting.

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Definitions:

AGI Threshold

The adjusted gross income level that triggers various tax benefits, deductions, and credits to phase out.

Tax Preparation Fees

The costs incurred for professional services to prepare and file taxes, which can sometimes be deducted from taxable income.

Charitable Contributions

Donations made to qualified organizations that may be deductible from taxable income, subject to certain limits and requirements.

Political Parties

Organized groups that aim to influence public policy and government by nominating candidates for public office and securing seats in legislative bodies.