Which of the Following Policies Is Likely to Enhance a Central

question 37

Multiple Choice

Which of the following policies is likely to enhance a central bank's credibility?

• A) announce inflation targets.
• B) appoint inflation doves as central bankers.
• C) make the central bank obligated to finance the national deficit.
• D) appoint central bankers for short terms that coincide with those in the legislative and executive branches of government.

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Definitions:

Social Categorisation

The process by which individuals classify others into groups based on shared characteristics.

Social Creativity

Group-based behavioural strategies that improve social identity but do not directly attack the dominant group’s position.

Social Change

The transformation over time of cultural values, norms, and social structures, leading to significant shifts in society.

Social Competition

Group-based behavioural strategies that improve social identity by directly confronting the dominant group’s position in society.