Instrument independence is ________.

Question

Quizplus · Accepted Answer

Instrument independence refers to the ability of the central bank to set monetary policy instruments, such as interest rates or reserve requirements, without interference from the government. This allows the central bank to pursue its mandate of maintaining price stability without political pressure. Option A is incorrect because it refers to goal independence, which is another aspect of central bank independence. Option B is incorrect because it suggests that the government sets monetary policy goals, which is not the case in an independent central bank system. Option C is incorrect because it refers to instrument dependence, which would imply that the government has control over policy instruments.

Instrument Independence Is ________