Which of the following gives the Fed a credibility problem?
A)Ricardian equivalence
B)Sticky prices
C)Rational expectations
D)Disinflation
E)Time inconsistency

Question

Quizplus · Accepted Answer

Time inconsistency refers to the idea that the Fed may not be able to follow through on its commitments to keep inflation low because of political pressures or changing economic circumstances. This uncertainty can lead to doubts about the Fed's credibility and ability to effectively carry out monetary policy.

Which of the Following Gives the Fed a Credibility Problem