The Time Inconsistency of Policy Implies That

question 37

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 easier for the Fed to increase output by increasing the money supply.
• C)people will believe Fed policy will be less inflationary than the Fed claims.
• D)what policymakers say they will do is usually not what they do,but people believe them anyway.

---

Definitions:

Cost Driver

A factor that causes variations in the cost of an activity or process, influencing the financial performance of a company.

Joint Costs

Costs incurred in producing products up to a split-off point, where multiple products are generated from the same process and the costs cannot be separately identified for each product.

Physical Units Method

This method calculates the cost per unit of production based on the physical units produced, commonly used in inventory costing and job costing.

Split-Off Point

The stage in a production process where multiple products become separately identifiable.