One tension that occurs in central banking in a democracy is O Central bankers only think on a short term basis. O Politicians usually know what is best for the economy in the long run, but central bankers have no incentive to listen to them. O There is nothing that central bankers can do to boost the economy in the short run. O Politicians who are elected for short terms are often more willing to accept (and sometimes encourage) a looser monetary policy in order to boost the economy and increase their chances of being re-elected, despite the negative long-term consequences for the economy.
One tension that occurs in central banking in a democracy is O Central bankers only think on a short term basis. O Politicians usually know what is best for the economy in the long run, but central bankers have no incentive to listen to them. O There is nothing that central bankers can do to boost the economy in the short run. O Politicians who are elected for short terms are often more willing to accept (and sometimes encourage) a looser monetary policy in order to boost the economy and increase their chances of being re-elected, despite the negative long-term consequences for the economy.
Macroeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506756
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter13: Money And The Banking System
Section: Chapter Questions
Problem 17CQ
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Question
![One tension that occurs in central banking in a democracy is
O Central bankers only think on a short term basis.
O Politicians usually know what is best for the economy in the long run, but central bankers have no incentive to listen to them.
O There is nothing that central bankers can do to boost the economy in the short run.
O
Politicians who are elected for short terms are often more willing to accept (and sometimes encourage) a looser monetary policy in order to boost the economy and increase their chances of being
re-elected, despite the negative long-term consequences for the economy.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F736e686e-92e6-43f2-ba45-8341324d4caf%2F2674d2f7-5823-458a-9992-6775aa80f5f8%2F7am98v_processed.png&w=3840&q=75)
Transcribed Image Text:One tension that occurs in central banking in a democracy is
O Central bankers only think on a short term basis.
O Politicians usually know what is best for the economy in the long run, but central bankers have no incentive to listen to them.
O There is nothing that central bankers can do to boost the economy in the short run.
O
Politicians who are elected for short terms are often more willing to accept (and sometimes encourage) a looser monetary policy in order to boost the economy and increase their chances of being
re-elected, despite the negative long-term consequences for the economy.
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