Research indicates that the more independent the central bank,
A)the smaller the budget deficit.
B)the higher the nominal interest rate.
C)the lower the rate of inflation.
D)the larger the time inconsistency problem in making policy.
E) the greater the likelihood of a "war of attrition" over policy.

Question

Quizplus · Accepted Answer

Research has consistently shown that central bank independence leads to lower rates of inflation. As central banks are able to pursue their monetary policy goals independent of political pressures, they are more likely to prioritize maintaining price stability and controlling inflation.

Research Indicates That the More Independent the Central Bank