Which of the following would be a cause of time inconsistenc

Which of the following would be a cause of time inconsistency of monetary policy?

Select one:

a. The general public have rational expectations.

b. The central bank cares about unemployment as well as inflation.

c. The central bank has a legislated inflation target.

d. The general public have adaptive expectations.

e. The central banker is conservative.

Solution

option b is correct. b. The central bank cares about unemployment as well as inflation.  central banker whose objective is to keep inflation close to some target rate and the unemployment rate close to the market-clearing level.