The Time Inconsistency of Policy Implies That

question 5

Multiple Choice

The time inconsistency of policy implies that

• A)what policymakers say they will do is generally what they will do,but people don't believe them because of current policy.
• B)when people expect that inflation will be low,it is harder for the Fed to increase output by increasing the money supply.
• C)people will believe Fed policy will be more inflationary than the Fed claims.
• D)what policymakers say they will do is usually not what they do,but people believe them anyway.

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Definitions:

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