The existence of the time inconsistency problem in macro policy suggests which of the following?
A) Use fiscal and monetary policy to fine tune the economy.
B) Reduce the independence of the central bank.
C) Appoint someone who is more conservative (economically) than the rest of the government to head the central bank.
D) Intervene frequently in the foreign exchange market.
E) Eliminate rational expectations from econometric models used for forecasting.
C
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The substitution effect of a price change for product X is the change in consumption of X associated with a change in
A) the price of X, with the level of utility held constant. B) the price of X, with the level of real income not considered. C) the price of X, with the prices of other goods changing by the same percentage as that for product X. D) income, with prices of other goods held constant.
Farm policy in the United States over the past eight decades has been designed primarily to:
A. Shift resources from the farm sector to the nonfarm sector B. Reduce monopoly in the farm sector C. Enhance and stabilize farm prices and income D. Produce a strategic reserve of food