The Time-Inconsistency Problem in Discretionary Policymaking About Unemployment and Inflation

Multiple Choice

The time-inconsistency problem in discretionary policymaking about unemployment and inflation can be effectively avoided when the:

A) policymaker has and is known to have an extremely strong preference for very low inflation.
B) policymaker does not care about the rate of inflation and simply sets policy to avoid unemployment.
C) private agents in the economy are not "rational."
D) policymaker has more information than do the private agents in the economy.