Learn Before
Government Directives and Central Bank Autonomy
Read the following scenario and answer the question that follows. A country's government is facing pressure to fund a large new social program without raising taxes. The Prime Minister publicly calls on the nation's central bank to directly purchase a large quantity of newly issued government bonds to cover the cost. The central bank's legally established mandate is to maintain price stability. Based on the principle of central bank independence, what is the most appropriate course of action for the central bank, and why?
0
1
Tags
Economics
Economy
Introduction to Macroeconomics Course
Ch.5 Macroeconomic policy: Inflation and unemployment - The Economy 2.0 Macroeconomics @ CORE Econ
The Economy 2.0 Macroeconomics @ CORE Econ
CORE Econ
Social Science
Empirical Science
Science
Evaluation in Bloom's Taxonomy
Cognitive Psychology
Psychology
Related
The 1990s Shift Towards Central Bank Independence
A country's government is facing an economic slowdown and publicly urges the national bank to significantly lower borrowing costs to stimulate growth. The bank's leadership, however, decides on a much smaller reduction, citing their legal responsibility to keep price increases within a pre-established, government-agreed range. Which action in this scenario most clearly demonstrates the bank's independence?
Government Directives and Central Bank Autonomy
Central bank independence implies that the bank has the authority to both establish its own primary economic objectives (such as the target inflation rate) and implement the policy measures required to meet those objectives, entirely without government oversight or input.
The Division of Labor in Monetary Policy