Which of the following best defines the political business cycle?
A)the fact that about every four years some politician advocates greater government control of the Bank of Canada
B)the potential for a central bank to increase the money supply and so output to help the incumbent get re-elected
C)the part of the business cycle caused by the reluctance of politicians to smooth the business cycle
D)the changes in output created by the monetary rule the Bank of Canada must follow

Question

Quizplus · Accepted Answer

The political business cycle refers to the tendency for incumbent governments to manipulate fiscal and monetary policies in order to boost economic growth and improve their chances of being re-elected. This manipulation may involve the central bank increasing the money supply to boost output and lower unemployment in the lead-up to an election.

Which of the Following Best Defines the Political Business Cycle