Terrorism? Only Nominally

Paraphrased from a multiple choice intermediate macro. quiz (I’m serious),

Q: Why do many governments not negotiate with terrorists?

A: If they do, it may be an incentive for more terrorism.

Follow up,

Q: How does this relate to monetary policy?

Possible A: The chairman of the Fed is a terrorist.

(N.B. The correct answer has to do with Fed credibility.)

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