Studies have shown that there is a negative correlation between the independence of a central bank and the average annual rate of inflation. This is because an independent central bank is better able to control inflation by setting monetary policy without political interference.

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Studies Show That

Question 89

Multiple Choice

Studies show that

A) the more independent the central bank, the lower the average annual rate of inﬂation.
B) the more independent the central bank, the higher the average annual rate of inﬂation.
C) there is no relationship between the degree of independence of a country's central bank and its inﬂation rate.
D) the more independent the central bank, the higher the average annual rate of unemployment.

Correct Answer: