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:

Financial Control

The processes, policies, and procedures that are put in place to monitor and manage an organization's financial resources effectively.

Bankruptcy

A legal process for businesses or individuals unable to repay their outstanding debts, providing a way to resolve insolvency.

Miscellaneous Costs

Expenses that do not fit into any standard category of a budget or financial statement, often irregular or minor in size.

Business Plan

is a formal document detailing a business's objectives, strategies, financial forecasts, and market analysis.