Time inconsistency is a problem when policymakers
a. have no flexibility in setting policy.
b. follow inflexible rules.
c. have discretion in their policy responses to changes in economic conditions.
d. does not follow the Taylor rule.
e. none of the above.
B
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The Fed initiates a contractionary monetary policy that is correctly anticipated by economic agents in the economy. The result is
A) decreased prices, but no change in real GDP. B) decreased prices and decreased real GDP in the short run, but only decreased prices in the long run. C) decreased real GDP in the short run and decreased prices in the long run. D) decreased real GDP and prices in both the short run and the long run.
The possible returns to a shareholder are:
a. rent and wages. b. fixed interest and dividend. c. fixed interest and a depreciation in the price of the stock. d. rent and fixed interest. e. dividend and an appreciation in the price of the stock.
Global warming, which causes unfavorable climatic changes due to the burning of fossil fuels, would be an example of a(n): a. positive externality
b. negative externality. c. internalized externality. d. Coase externality.
Other things equal, the higher the price level, the higher is the real wealth of households
a. True b. False Indicate whether the statement is true or false