1.(Policy Credibility)What is policy credibility and how is it relevant to the problem of reducing high inflation? How is credibility related to the time-inconsistency problem?
2. (Case Study: Central Bank Independence and Price Stability) One source of independence for the Fed is the length of term for members of the Board of Governors. In the chapter before last, we learned that the Fed is a "money machine." Does this suggest another source of Fed independence from Congress?