Application of the time inconsistency problem to monetary policy suggests that, without some mechanism to ensure commitment, the
A) rate of inflation will be higher than it would be with commitment.
B) level of real output will be lower than it would be with commitment.
C) rate of inflation will be higher and the level of real output will be lower than they would be with commitment.
D) rate of inflation and the level of real output will be higher than they would be with commitment.
A
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The balance of payments can be thought of as the balance of economic transactions
a. True b. False
If a resource is in fact becoming scarcer, then one should expect
A. the price of the resource to rise. B. less demand for the resource as people try to conserve. C. greater supply as people reduce inventories before it is all gone. D. the quantity supplied to increase.
What is most likely to occur when rapid population growth leads to lower capital stock per worker?
a. The standard of living will rise. b. Economic growth will increase. c. Total output will decrease. d. Labor productivity will decrease.
The problem of lags suggests that monetary policy should
A) respond swiftly to statistical reports of economic conditions in the recent past. B) respond to conditions expected to exist in the future. C) stagger its implementation of policies so that there will be an ongoing effect on the economy. D) not respond to changing economic conditions in the economy but instead rely on the economy's self correcting mechanism.