Application of the Time Inconsistency Problem to Monetary Policy Suggests

Multiple Choice

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 it would be with commitment.
D) rate of inflation and the level of real output will be higher than it would be with commitment.
E) the rate of inflation will be higher and the level of real output would be indeterminant than it would be with commitment.