Why is accountability for monetary policy choices (as opposed to giving policymakers undisciplined discretion) important?
A) Monetary policy has a large and lasting influence on aggregate demand and therefore on employment and income.
B) Elected policymakers can benefit from manipulating monetary policy.
C) Monetary policy announcements will be more credible.
D) Countries with the most independent central banks tend to have the highest rates of inflation.

Question

Quizplus · Accepted Answer

Accountability for monetary policy choices is important because monetary policy can have a significant and lasting impact on the overall demand and, consequently, employment and income. Giving policymakers unbridled discretion could lead to choices that are more politically motivated than economically sound, causing an increase in inflation or recession. When policymakers are held accountable, they are more likely to make decisions based on economic principles and data, which could result in better economic outcomes.

Why Is Accountability for Monetary Policy Choices (As Opposed to Giving