Question

What incentives arise for a central bank to fall into the time-inconsistency trap of pursuing overly expansionary monetary policy?

Short answer

Central bankers preferably accept that when they seek after an excessively expansionary policy it will prompt an expansion in work or lift the result.

Step-by-step solution

Concept Introduction

The Governing Council has characterized a strategy which includes an evaluated meaning of cost steadiness.

Explanation

Central bankers preferably accept that when they seek after an excessively expansionary policy it will prompt an expansion in employment or lift the result. Be that as it may, over the long haul, this outcome is just in expanding expansion with no genuine additions as far as result or employment. Additionally, the government officials can impact the central bank to seek after an excessively expansionary policy.

Final answer

The politicians can impact the central bank to seek after an excessively expansionary policy.