To Deal with the Time Inconsistency Problem Associated with Monetary

question 45

Multiple Choice

To deal with the time inconsistency problem associated with monetary policy, some have suggested that:

• A) the central bank implement expansionary monetary policy prior to election years.
• B) the contract of the central bank governor be reviewed regularly by the parliament.
• C) elected officials should have a direct influence on the implementation of monetary policy.
• D) the head of the central bank be chosen by election.
• E) the central bank be made more independent.

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Definitions:

Current Liabilities

Short-term financial obligations that are due within one year or within the normal operating cycle of a business.

Inventory

the total amount of goods or materials held in stock by a company, available for sale or use in production.

Noncash Expense

Expenses recorded on the income statement not requiring actual cash outflow, such as depreciation and amortization.

Depreciation

The accounting practice of allocating the cost of a tangible or physical asset over its useful life, reflecting the decrease in value of the asset over time.