When Zimbabwe needed to finance the war against Congo, the government issued bonds and forced the Central Bank to buy those bonds in exchange for newly-printed Zimbabwean dollars. This action prompted a hyperinflation of almost 100,000 percent. This is an example of a lack of:
A)central bank independence.
B)central bank dependence.
C)central bank effectiveness in its monetary policy.
D)central bank economists running the institution.

Question

Quizplus · Accepted Answer

The example illustrates a lack of central bank independence, as the government forced the central bank to finance its expenditures by buying bonds and printing money, leading to hyperinflation.

When Zimbabwe Needed to Finance the War Against Congo, the Government