Question

The time inconsistency of policy implies that a. what policymakers say they will do is generally what they will do, but people don't believe them because of current policy. b. what policymakers say they will do is usually not what they do, but people believe them anyway. c. when people expect that inflation will be low, it is harder for the Fed to increase output by increasing the money supply. d. people expect Fed policy to be more inflationary than the Fed claims.

Answer 1

people expect Fed policy to be more inflationary than the Fed claims.

Step-by-step explanation:

I'm not sure why the answer is right I just wanted to put the correct one on here since the other one is wrong so here you go.

Answer 2

The time inconsistency of policy implies that

a. what policymakers say they will do is generally what they will do, but people don't believe them because of current policy.

Step-by-step explanation:

When the current policy of a decision maker does not agree with the current practice due to the passage of time because policies that were determined to be optimal before now are no longer considered to be optimal today and are not implemented, then there is said to be a problem of time inconsistency of policy. It generally happens in the formulation and implementation of monetary policies by the central bank.