The political business cycle implies all of the following EXCEPT that:
A)central banks should be independent of politics.
B)discretionary fiscal policy should be avoided.
C)politicians pumping up the economy in an election year make the economy less stable.
D)monetary policy is ineffective if inflation is high.

Question

Quizplus · Accepted Answer

The political business cycle theory does not imply that monetary policy is ineffective if inflation is high. It focuses on the manipulation of economic variables by politicians during an election cycle to gain votes, and the potential negative effects on economic stability. It does not address the effectiveness of monetary policy in controlling inflation.

The Political Business Cycle Implies All of the Following EXCEPT