What will time inconsistency cause?
A) It will cause the short-run Phillips curve to be higher than it otherwise would.
B) It will cause the short-run Phillips curve to be lower than it otherwise would.
C) It will cause the long-run Phillips curve to be farther to the right than it otherwise would.
D) It will cause the long-run Phillips curve to be farther to the left than it otherwise would.

Question

Quizplus · Accepted Answer

Time inconsistency causes policymakers to make decisions that prioritize short-term benefits over long-term goals. This can lead to expansionary monetary policy that drives up inflation, causing the short-run Phillips curve to shift upwards.

What Will Time Inconsistency Cause