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Politicians in a democratic society may be shortsighted because of their desire to win
reelection; thus, the political process can ____.
A) impart an inflationary bias to monetary policy
B) impart a deflationary bias to monetary policy
C) generate a political business cycle, in which just before an election expansionary policies are
pursued to lower unemployment and interest rates
D) cause both A and C of the above
Answer: D
Diff: 3 Type: MC Page Ref: 363
Skill: Recall
Objective List: 15.3 Describe the relationship between central bank independence and
macroeconomic performance
Putting the Bank of Canada under control of the government ____.
A) may place too much pressure on the Bank of Canada to finance federal budget deficits
B) impart an inflationary bias to monetary policy
C) generate a political business cycle, in which just before an election contractionary policies are
pursued to raise unemployment and interest rates
D) may cause only A and B of the above
Answer: D
Diff: 3 Type: MC Page Ref: 364
Skill: Recall
Objective List: 15.3 Describe the relationship between central bank independence and
macroeconomic performance
Critics of the current system of Bank of Canada independence contend that ____.
A) the current system is undemocratic
B) voters have too much say about monetary policy
C) the governor has too much control over monetary policy on a day-today basis
D) Both B and C of the above are true.
Answer: A
Diff: 2 Type: MC Page Ref: 364
Skill: Recall
Objective List: 15.3 Describe the relationship between central bank independence and
macroeconomic performance