The Political Business Cycle Implies All of the Following EXCEPT

question 132

Multiple Choice

The political business cycle implies all of the following EXCEPT that:

• A)central banks should be independent of politics.
• B)discretionary fiscal policy should be avoided.
• C)politicians pumping up the economy in an election year make the economy less stable.
• D)monetary policy is ineffective if inflation is high.

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Definitions:

Median-Voter Model

A theory suggesting that the outcome of majority voting processes will reflect the preferences of the median voter.

Cost-Benefit Analysis

A systematic approach to estimate the strengths and weaknesses of alternatives, assessing the value of costs and benefits to support decision-making.

Paired-Choice Majority Votes

A voting method in which voters choose between pairs of candidates or options, with the majority preference deciding the outcome.

Paradox of Voting

The situation where individual rationality does not lead to collective rationality, suggesting that the cost of voting outweighs the apparent benefits.