447 $
© 2014 Pearson Canada Inc.$- The case for Bank of Canada independence does not include the idea that ____.
A) political pressure would impart an inflationary bias to monetary policy
B) a politically insulated Bank would be more concerned with long-run objectives and thus be a
defender of a sound dollar and a stable price level
C) a Bank of Canada under the control of the government might make the so-called political
business cycle more pronounced
D) the principal-agent problem is perhaps worse for the Bank of Canada than for politicians
since the former does not answer to the voters on election day
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
14 ) Critics of Bank of Canada independence argue ____.
A) that it is undemocratic to have monetary policy controlled by an elite group responsible to no
one
B) that an independent Bank of Canada conducts monetary policy with a consistent inflationary
bias
C) that the Bank of Canada, since it does not face a binding budget constraint, spends too much
of its earnings
D) Only A and B of the above.
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
- Recent research indicates that inflation performance (low inflation) has been found to be best
in countries with ____.
A) the most independent central banks
B) political control of monetary policy
C) money financing of budget deficits
D) a policy of always keeping interest rates low
Answer: A
Diff: 2 Type: MC Page Ref: 365
Skill: Recall
Objective List: 15.3 Describe the relationship between central bank independence and
macroeconomic performance