A time-inconsistency problem in macroeconomic policy can occur when the policymaker:
A)is made to follow a strict and an inflexible rule.
B)has discretion in the short run but follows a rule in the long run.
C)changes stated policy because it benefits their current circumstance at the expense of public trust.
D)has no discretion.

Question

Quizplus · Accepted Answer

Time-inconsistency arises when policymakers change their policies to benefit short-term circumstances, undermining long-term commitments and public trust.

A Time-Inconsistency Problem in Macroeconomic Policy Can Occur When the Policymaker