The coordination problem is difficult to solve because:
A)policymakers cannot make unified decisions.
B)aggregate price-setting behavior has built-in inflation inertia.
C)individual price-setting behavior economywide has built-in inflation inertia.
D)central banks are controlled by many different interests.
E)all of the above

Question

Quizplus · Accepted Answer

The coordination problem is difficult to solve because individual price-setting behavior economywide has built-in inflation inertia. Policymakers may be able to make unified decisions, but if individual price-setters are unwilling or unable to adjust their prices in response to changes in demand or supply, the economy will still experience inflationary pressures. Additionally, while central banks may face pressures from various interests, this is not necessarily the main challenge in solving the coordination problem.

The Coordination Problem Is Difficult to Solve Because