Economists consider central bank independence to be a key factor in keeping inflation under control. Why?
A) Elected officials (legislators and the executive branch) tend to pursue policies popular with the public that may increase inflationary tendencies, whereas the Central Bank does not have such pressure.
B) The central bank should be able to use stimulative monetary policy whenever it chooses without worrying about inflationary tendencies.
C) Inflation is generated by legislative deficit spending-the central bank can offset that spending and the inflation it causes.
D) The central bank's directors and executives are always political appointees, and it is clear that low inflation is popular with the public.

Question

Quizplus · Accepted Answer

Central bank independence is important in keeping inflation under control because elected officials may pursue policies that are popular with the public but lead to inflationary tendencies. The Central Bank does not have such pressure and can focus on keeping inflation low.

Economists Consider Central Bank Independence to Be a Key Factor