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What Does the Time Inconsistency of Policy Imply

Question 3

Multiple Choice

What does the time inconsistency of policy imply?


A) It implies that what policymakers say they will do is generally what they will do, but people don't believe them because of current policy.
B) It implies that when people expect that inflation will be low, it is harder for the Bank of Canada to increase output by increasing the money supply.
C) It implies that people will believe the Bank of Canada policy will be more inflationary than the Bank of Canada claims.
D) It implies that the Bank of Canada coordinates its actions with elected officials.

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