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 these answers are correct.

Question

Quizplus · Accepted Answer

The coordination problem is difficult to solve because individual price-setting behavior economywide has built-in inflation inertia. This means that prices do not adjust easily and quickly across the economy, creating imbalances and difficulties in coordination. The other answer choices are not specific enough or do not fully capture the nature of the coordination problem.

The Coordination Problem Is Difficult to Solve Because