A fiscal policy that changes over time as economic conditions change is considered to be time inconsistent.

Question

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A time-inconsistent fiscal policy is one that initially commits to a certain level of government spending or taxation, but changes that policy over time due to changes in economic conditions, political pressures, or other factors. This inconsistency can undermine the effectiveness of the policy and lead to uncertainty and volatility in the economy.

A Fiscal Policy That Changes Over Time as Economic Conditions