The credibility of the central bank:
A) promotes long-run growth.
B) is irrelevant for controlling inflation.
C) is crucial for controlling inflation and stabilizing output.
D) promotes sensible fiscal policy.
E) implies low interest rates.

Question

Quizplus · Accepted Answer

The credibility of the central bank is crucial for controlling inflation and stabilizing output by ensuring that its policies and actions are believed and trusted by the public. This helps to anchor inflation expectations and promote stability in the economy.

The Credibility of the Central Bank