Which of the Following Statements Concerning an Independent Central Bank

question 90

Multiple Choice

Which of the following statements concerning an independent central bank are true?

• A) Politicians may prefer an independent central bank, as it can be used as a "whipping boy" or "scapegoat" for poor economic performance.
• B) Politicians in a democratic society may be shortsighted because of their desire to win reelection; thus, the political process may generate a political business cycle, in which just before an election contractionary policies are pursued to raise unemployment and interest rates.
• C) Putting the Bank of Canada under control of the government may place too much pressure on the Bank of Canada to finance federal budget deficits, thereby imparting an inflationary bias to monetary policy.
• D) Only A and C of the above are true statements.

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