Author Question: Application of the time inconsistency problem to monetary policy suggests that, without some ... (Read 84 times)

JMatthes · **on:** Jun 30, 2018

Application of the time inconsistency problem to monetary policy suggests that, without some mechanism to ensure commitment, the

A) rate of inflation will be higher than it would be with commitment.
B) level of real output will be lower than it would be with commitment.
C) rate of inflation will be higher and the level of real output will be lower than they would be with commitment.
D) rate of inflation and the level of real output will be higher than they would be with commitment.

Question 2

Inflation might lead to ________ because ________.

A) lower demand for stocks; of tax distortions
B) lower demand for cash; money does not typically yield interest
C) uncertain or uneven demand for goods; higher fluctuations in relative prices make it harder for consumers to compare among goods and make rational consumption decisions
D) all of the above
E) none of the above