The pursuit of low unemployment rates must necessarily result in time-inconsistent government policies.

Question

Quizplus · Accepted Answer

In the pursuit of low unemployment rates, governments may implement expansionary monetary policies, such as lowering interest rates or increasing government spending, to stimulate economic growth and job creation. However, such policies may not be sustainable in the long run and could lead to inflation or other economic imbalances. This is known as time inconsistency in economic policy. Therefore, the pursuit of low unemployment rates will likely result in time-inconsistent government policies.

The Pursuit of Low Unemployment Rates Must Necessarily Result in Time-Inconsistent