Putting the Bank of Canada under control of the government ________.

Question

Quizplus · Accepted Answer

If the government is in control of the Bank of Canada, there is a risk that it may put too much pressure on the bank to finance federal budget deficits, which could lead to inflationary bias in monetary policy. This could then generate a political business cycle where contractionary policies are pursued just before an election to raise unemployment and interest rates. These risks are indicated in options A and B.

Putting the Bank of Canada Under Control of the Government