Time Inconsistency of Policy Assignment | Homework For You
1. Which of the following best defines time inconsistency of policy?
A. The increasing inaccuracy of econometric models as the time horizon becomes longer.
B. The tendency for the rise in output to be greater in the early years of a president’s term, and smaller in the later years.
C. The effects of political electoral cycles on the business cycle.
D. The tendency for policy makers to deviate from a pre-announced optimal policy once agents in the economy have adjusted their behavior and expectations based on the pre- announced policy.
E. The effect of economic uncertainty on short-run stabilization policy.
2. To solve the “time inconsistency” problem in macro policy, a nation may well have to
A. restrict itself in the present from taking certain policy moves in the future.
B. lift all restrictions on future policy moves.
C. present policy moves to the public, for example, in a referendum.
D. use the courts to settle policy disputes.
E. make the central bank more responsive to the popular will.
3. The primary deficit is
A. government spending minus interest on the debt.
B. government spending minus net tax revenues.
C. government spending plus interest on the debt minus net tax revenues.
D. government spending plus net tax revenues minus interest on the debt.
E. interest on the debt minus net tax revenues. Get Economics homework help today
