To prevent monetary policy from becoming highly politicized, many countries have A. made their central banks be politically independent. B. put their central banks under the full control of their law-making agencies. C. allowed the heads of their central banks to serve for very short terms. D. made elected officials be the heads of their central banks.

Question

Carleen

Business

14 July, 08:15

To prevent monetary policy from becoming highly politicized, many countries have A. made their central banks be politically independent. B. put their central banks under the full control of their law-making agencies. C. allowed the heads of their central banks to serve for very short terms. D. made elected officials be the heads of their central banks.

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Answers (1)

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Paulina Welch · Answer 1

The correct answer is letter A. They made their central banks politically independent.

Explanation:

Central banks have become independent in developed countries due to their macroeconomic stability. Thus, to maintain it, the independence of the Central Bank was adopted, and this measure would have greater control of the issuance of money by the government to finance its spending. In this sense, the independence of the Central Bank removes the influence of parliament from monetary policy decisions, and also removes the influence on managers, with parliament only overseeing, making management more technical.