The Time Inconsistency of Monetary Policy Means That

question 18

Multiple Choice

The time inconsistency of monetary policy means that

• A)once people have formed expectations of low inflation based on a promise by the central bank,the central bank is tempted to raise inflation to lower unemployment.
• B)at some times central banks think it is more important to keep unemployment low;at other times,they think it is more important to keep inflation low.
• C)monetary policy is not consistent across time because it is influenced by politics.
• D)monetary policy is not consistent across time because policymakers are incompetent.

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Definitions:

Authoritative Parents

A parenting style characterized by a high degree of responsiveness and demandingness, combining firm but fair discipline with support and affection towards children.

Competent

Being competent refers to having the necessary ability, knowledge, or skill to perform a task or fulfill a role effectively and efficiently.

Promote Autonomy

To support or encourage self-directing freedom and especially moral independence in actions and decisions.

Self-efficacy

A belief in one's own capability to organize and execute the courses of action required to manage prospective situations.