A Time-Inconsistency Problem in Macroeconomic Policy Can Occur When the Policymaker

question 18

Multiple Choice

A time-inconsistency problem in macroeconomic policy can occur when the policymaker:

• A) is made to follow a strict and an inflexible rule.
• B) has discretion in the short run but follows a rule in the long run.
• C) has discretion to act as it seems best in each situation, based on his or her own knowledge and experience.
• D) has no discretion.

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Definitions:

Distribution of Scores

The spread of values within a set of data, often analyzed in psychological research to understand variability within a sample.

Median

The middle value in a data set, which separates the higher half from the lower half of the data set.

Center

A focal point or hub often used for specific activities or the provision of services.

Cognitive-behavioral

A psychological approach that emphasizes the importance of thought patterns and behaviors in understanding and treating psychological disorders.