The notion that discretionary fiscal and monetary policies are subject to strong incentives to change them in an attempt to achieve short-term gains is called
A) the separation of powers.
B) policy transitivity.
C) systematic inefficiency.
D) rational expectancy.
E) time inconsistency.

Question

Quizplus · Accepted Answer

The notion described is commonly known as time inconsistency, where policymakers face a trade-off between short-term gains and long-term stability, leading them to make decisions that are not consistent over time. This behavior occurs due to the lack of commitment to a long-term policy goal or due to the changing political or economic environment.

The Notion That Discretionary Fiscal and Monetary Policies Are Subject