Recall the Application about the increase in political independence for the Bank of England and its effect on anticipated inflation to answer the following question(s). In 1997, the Bank of England became more independent from the government. Although the government still retained the authority to set overall policy goals, the Bank of England was free to pursue its policy goals without direct political control. Federal Reserve economist Mark Spiegel compared interest rates on two different types of long-term bonds, those that are automatically adjusted for inflation and those that are not, to see how the British bond market reacted to this policy change.
-According to this Application, in 1997, the Chancellor of Exchecquer in Great Britain announced that the Bank of England would be more independent from the government. Typically, the more independent a nation's central bank
A) the higher the natural rate of unemployment.
B) the faster the velocity of money.
C) the lower the expected rate of inflation.
D) the steeper the Phillips curve.

Question

Quizplus · Accepted Answer

The more independent a nation's central bank, the lower the expected rate of inflation. This is because an independent central bank is able to focus on its policy goals without direct political influence, which can lead to more effective regulation of inflation.

Recall the Application About the Increase in Political Independence for the Bank