When Policy Makers Have an Incentive to Announce One Policy

question 140

Multiple Choice

When policy makers have an incentive to announce one policy to shape expectations but then pursue a different policy once those expectations have been formed and acted on,there is

• A)no problem; this is normal behavior
• B)policy credibility
• C)a time-inconsistency problem
• D)rational expectation
• E)None of the answers is correct

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Definitions:

Developing Countries

Nations with a lower standard of living, underdeveloped industrial base, and low Human Development Index relative to other countries.

Undeveloped Countries

Countries with poor economies; problematically implies a lack of economic talent or exposure.

Dependency Theory

A theoretical perspective that criticizes the global economic system as perpetuating inequality between developing and developed nations.

World Systems

A socio-economic model that emphasizes the world-economy as a complex system structured by political and economic relations that extend across global territories and peoples.