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:

Procedural Knowledge

Describes the often unconscious, nondeclarative knowledge of how to do things that underlies many physical skills.

Knot Tying

The act of securely fastening or binding objects together using rope, string, or another flexible material through various techniques and loops.

Autobiographical Knowledge

Refers to a person's memory of personal experiences and events, including the times, places, emotions, and other contextual who, what, when, where, and why details of one's life.