Learn Before
Historical Government Control over Monetary Policy
Prior to a widespread shift that began around the late 1980s, it was common for national governments to directly control monetary policy, leaving central banks with very little operational independence. In this arrangement, monetary policy decisions were made by the government, much like fiscal policy. This model of direct government control over monetary policy persists in some countries, such as China, even today.
0
1
Tags
Economics
Economy
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
Introduction to Macroeconomics Course
Related
Historical Government Control over Monetary Policy
Influence of 1970s High Inflation on Macroeconomic Policy Rethinking
Figure E6.1a: Determining the Policy Rate in a Scarce Reserves System
An economy is experiencing a period of slow growth and rising unemployment. To stimulate economic activity, what action is a central bank most likely to undertake as part of its standard policy response?
Responding to an Overheating Economy
A central bank decides to raise its main interest rate to combat rapidly rising prices in the economy. Arrange the following outcomes in the logical order they would occur following this policy action.
Evaluating the Trade-offs of Monetary Policy
Shared Role of Fiscal and Monetary Policy in Managing the Economy
Policy Interest Rate
Inflation Targeting
Definition of Central Bank Independence
Definition of Inflation Targeting
The 1990s Shift Towards Central Bank Independence
Learn After
Political Incentives and Economic Decisions
In an economic system where the government's political leaders directly control monetary policy, which scenario is most likely to unfold in the months leading up to a national election?
Monetary Policy Decision-Making Analysis
The model of a central bank operating with significant independence from the day-to-day influence of political leaders has been the standard and most common arrangement for managing a nation's economy throughout the majority of the 20th century.
Government's Role in Monetary Decisions
Match each monetary policy scenario with the institutional arrangement under which it is most likely to occur.
A country's political leadership announces a significant reduction in the primary interest rate two months before a scheduled election. The stated goal is to stimulate immediate job growth. This decision overrides the recent recommendations of the nation's central bank, which had advised caution due to rising inflation concerns. This scenario is most characteristic of an economic system where:
In the economic model where a central bank lacks operational independence, which was common in many countries before the late 1980s, monetary policy decisions are made directly by the ______.
Consider an economic system where monetary policy is under the direct control of elected government officials, rather than an independent institution. From a long-term economic perspective, what is the most significant potential weakness of this arrangement?
Comparing Economic Policy Structures