Which of the Following Statements Concerning an Independent Central Bank

question 73

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 expansionary policies are pursued to lower unemployment and interest rates.
• C) Putting the Bank of Canada under control of the government may place too much pressure on the Bank to finance federal budget deficits, thereby imparting an inflationary bias to monetary policy.
• D) All of the above are true statements.

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Definitions:

Proxy

An authorization allowing one person to act on behalf of another in voting matters or other decision-making processes.

Antibribery Provision

Regulations within laws designed to prevent bribery and corruption by imposing legal penalties for those practices.

Foreign Corrupt Practices Act

A U.S. law that prohibits companies and their individuals from bribing foreign officials to gain a business advantage.

Antifraud Provisions

Legal measures designed to prevent fraudulent activities, especially in securities, financial transactions, and corporate practices.