By refusing to be time inconsistent,a central bank is ________ its reputation and ________ "policy credibility."
A)harming,losing
B)harming,gaining
C)investing in,losing
D)investing in,gaining

Question

Quizplus · Accepted Answer

By refusing to be time inconsistent, a central bank is investing in its reputation and gaining "policy credibility." Time consistency refers to the idea that a central bank will follow through on its announced policy actions, which is essential to maintaining credibility and a positive reputation. When a central bank upholds the expectation of time consistency, it is more likely to be trusted by investors and stakeholders, which ultimately strengthens its reputation and credibility. Therefore, the best answer is D.

By Refusing to Be Time Inconsistent,a Central Bank Is ________