Central Banks In The World Today Verified Test Bank Ch.15

Student name:__________

1) If we look back in history, why has the role of creating money fallen to central banks?

2) If governments operated like businesses, meaning their goal was to maximize profits, why would they likely never give up the power to print money to any other institution?

3) Discuss how a government ceding the right to control the amount of currency to a central bank is a way to treat a potential moral hazard problem.

4) What are the three main functions a central bank performs in its role as a banker's bank?

5) Explain why it is correct to say the Federal Reserve functions as the government's bank but it is incorrect to say it controls the government's budget.

6) Describe two things that modern central bankers do not do.

7) What are the specific objectives of most central bankers?

8) Discuss how the goals of central bankers can be linked to a specific type of risk and the ability or inability of individuals to eliminate this risk.

9) Imagine you own a retail mail order business. In January, you produce your catalog, where items and prices are listed, and you use the same catalog all year. The central bank in your country increases the money supply by an amount to cause inflation to average one percent each month. Ignoring any seasonality in sales (like the holiday season), what should happen to your sales as the year progresses and why?

10) What may be the reasons that explain the observation that during periods of hyperinflation economic growth actually slows or even contracts?

11) Explain why inflation degrades the information content of prices.

12) If one of the specific goals that central bankers focus on is economic growth, should they aim for the highest short-term growth rate the economy can achieve? Explain.

13) In the country of Fantasyland, the current per capita real income is 20,000 units of output, and the current average growth rate is 2.0 percent. What will the standard of living be in this country in 20 years? What will be the difference in the standard of living twenty years from now if Fantasyland grows at a rate of 3.5 percent and we assume population is constant?

14) One of the specific goals for central bankers is financial system stability. Considering the United States, for example, would this imply that the Federal Reserve would always take action to prevent any single bank from failing? Explain.

15) Use the concept of time consistency to explain the irony of how limiting the discretion of policymakers can lead to better outcomes for society.

16) How do the specific goals of interest rate stability and exchange rate stability differ in importance from the other specific goals mentioned for central bankers?

17) What are the potential problems that can result if central bankers set a target of a zero rate of inflation?

18) Why might the central bankers in emerging market economies focus more attention on a stable exchange rate than, say, the Federal Reserve or the European Central Bank?

19) Today there is a clear consensus about the best way to design a central bank. What are the criteria for a successful central bank?

20) The chairman of the Fed gives a speech and hints that, at the next meeting of the Open Market Committee, the issues of a rapidly growing economy and preliminary indications of rising prices will have to be addressed. You are in the market for a new house and your mortgage broker calls to tell you that the interest rate on the $100,000, 30-year mortgage you applied for has just increased by a quarter of a percent. Why did the rate increase even though the Fed has not announced any rate change?

21) What do you think is meant by the statement that "successful monetary policy requires competent people and the right institutional environment"?

22) What are the operational components of central bank independence?

23) The apparent result of central bank independence has been better performing economies. Given this result, why do you think it took so long for many countries to create independent central banks?

24) The Federal Reserve didn't always communicate its actions to the public like it does today. As recently as the mid-1990s, secrecy ruled. Why do you think the Fed and most central banks now are more public about their actions and the reasons for them?

25) Provide an example where monetary policymakers in the United States would be put in a position of conflicting goals and as a result forced to make a tradeoff.

26) Imagine a central banker who takes office believing that, ultimately, the best way to stimulate an economy is to keep people guessing. This means the policymaker will often, but not always, announce one change but then actually do something else. What do you think of the central bank's chances for achieving its objectives and why?

27) Using the United States as an example, explain why rising budget deficits on the part of a federal government creates a potential point of conflict between fiscal and monetary policymakers.

28) Why might Congress actually prefer the higher rate of inflation that might result from deficit spending to higher taxes and/or a cut in government spending?

29) Beginning in July, 2018, President Donald Trump began to blast the Federal Reserve and Chairman Jay Powell in the press and on social media. Consider what this could have caused in the economy. For example, suppose this led to a sacrifice of the independence of the Federal Reserve from the government and eventually caused the Fed to lose credibility with the public. Then, when the COVID-19 pandemic hit in early 2020, suppose the American public did not believe the Fed’s message that the country would not suffer from spiraling inflation—and, soon thereafter, inflation began to spiral. Use a supply and demand model for the bond market to illustrate the impact this would have on bond prices and interest rates in the United States.

30) Explain why inflation is a way for governments to default on a portion of the debts they owe.

31) Predict how monetary policymaking would change, if at all, if members of the Board of Governors of the Federal Reserve were popularly elected to two-year terms and could run for re-election.

32) The central bank in the United States is the

A) Bank of America.
B) Federal Reserve.
C) U.S. Treasury.
D) Bank of the United States.

33) Central banks around the world

A) saw the Financial Crisis of 2007–2009 coming and tried to prevent it.
B) saw the Financial Crisis of 2007–2009 coming but could not prevent it.
C) did not see the Financial Crisis of 2007–2009 coming and were not able to prevent it.
D) did not see the Financial Crisis of 2007–2009 coming but had processes in place to prevent it.

34) The actions of central banks around the world

A) are most extreme in developing economies.
B) are politically controversial during financial crises.
C) are vital to the day-to-day operation of any modern economy.
D) affect citizens of modern economies only during times of financial crisis.

35) The number of central banks that exist in the world today is

A) less than 10.
B) about 250.
C) about 180.
D) over 50 but less than 100.

36) One monopoly that modern central banks have is in

A) regulating commercial banks.
B) making loans to banks.
C) issuing U.S. Treasury securities.
D) issuing currency.

37) In the U.S., the authority to issue currency is held by the

A) Federal Reserve.
B) U.S. Treasury.
C) Office of the Comptroller of the Currency.
D) U.S. Mint.

38) Monetary policy in the United States is under the control of the

A) U. S. Treasury.
B) President.
C) Federal Reserve.
D) U.S. Senate.

39) The ability to create money means the central bank can control

A) the availability of money and credit in a country's economy.
B) tax revenue.
C) the unemployment rate.
D) government expenditures.

40) Which one of the following statements is true?

A) Printing currency can be a profitable venture for a government.
B) Printing currency, while necessary, is a losing venture for a government.
C) Printing too much money usually leads to lower prices.
D) In the modern economy the amount of money created has no effect on prices.

41) Many governments give their central bank control over issuing currency because

A) printing currency can be profitable for a government, providing a strong incentive to print too much.
B) having large amounts of currency can lead to lower rates of inflation.
C) central banks use the profits from issuing currency to finance their operations.
D) the only way to distribute currency to banks is through the central bank.

42) Operation Bernhard was a German operation to attack the United Kingdom by using

A) German Panzers.
B) counterfeit British pounds.
C) tariffs and other trade barriers to limit British exports to Germany.
D) sophisticated economic policy to discredit the British Parliament.

43) In its role as the bankers' bank, a central bank performs each of the following except which one?

A) providing loans during times of financial distress
B) providing deposit insurance
C) overseeing commercial banks and the financial system
D) managing the payments system

44) The central bank has the ability to create money, which means that it

A) can control the availability of money but not the availability of credit in the economy.
B) can make loans only when other institutions can.
C) can impact the rate of inflation.
D) has an objective to maximize its profit.

45) The stability of the financial system is enhanced by the ability of central banks to

A) be a lender of last resort.
B) provide loans to insolvent banks.
C) provide deposit insurance.
D) convert poorly run banks into branches of the central bank.

46) In 2018, the average daily volume on the Federal Reserve's Fedwire system was

A) $28 billion.
B) $280 billion.
C) $2.8 trillion.
D) $280 million.

47) The Federal Reserve's Fedwire system is used mainly to provide

A) a means for foreign banks to transfer funds to U.S. banks.
B) an inexpensive and reliable way for financial institutions to transfer funds to one another.
C) an inexpensive way for individuals to pay their bills online.
D) a means for the Treasury to collect tax payments.

48) One function of modern central banks is to

A) control securities markets.
B) control the government's budget.
C) control the availability of money and credit.
D) manage fiscal policy.

49) The rationale for the existence of central banks is mainly that

A) financial markets lack transparency.
B) they are needed for the supervision of banks.
C) financial intermediation cannot occur without a central bank.
D) financial systems are prone to periods of extreme volatility.

50) The specific goals of central banks include all of the following except which one?

A) high stock prices
B) low and stable inflation
C) high and stable real growth
D) a stable exchange rate

51) The specific goals of central banks include each of the following except which one?

A) high and stable real growth
B) low and stable inflation
C) high levels of exports
D) low and stable unemployment

52) A primary goal of central banks is to

A) reduce the idiosyncratic risk that impacts specific investments.
B) reduce systematic risk.
C) keep stock and bond prices high.
D) keep inflation rates high.

53) Central banks often find that

A) they can efficiently pursue all of their goals simultaneously.
B) there are tradeoffs that make pursuing all of their goals simultaneously impossible.
C) the goal(s) they pursue will be determined by their profitability.
D) they must keep their goals secret or else they cannot be attained.

54) The primary objective of most central banks in industrialized economies is

A) high securities prices.
B) low unemployment.
C) price stability.
D) a strong domestic currency.

55) If prices are not stable,

A) money becomes less useful as a store of value.
B) money performs better as a unit of account.
C) it may be an inconvenience, but resources are still allocated efficiently.
D) prices become highly useful for conveying information.

56) Which one of the following is the best analogy? Inflation is like a

A) pound having more ounces.
B) day having more hours.
C) minute having fewer seconds.
D) mile having more feet.

57) The efficient allocation of resources requires

A) that prices reflect the relative value of goods and services.
B) that inflation not exceed three percent a year.
C) deflation.
D) prices to remain constant.

58) As the inflation rate

A) increases, inflation becomes less stable.
B) decreases, inflation becomes less stable.
C) decreases, inflation becomes more volatile.
D) increases, inflation becomes more stable.

59) Stable inflation implies that

A) the rate of inflation averaged over many years is zero.
B) inflation is predictable.
C) the rate of inflation conceals relative price changes.
D) there are low rates of unemployment.

60) The correlation between high rates of inflation and economic growth is

A) direct; one brings about the other.
B) inverse; high inflation usually means low economic growth.
C) nonexistent; there is no correlation between these measures.
D) direct at low rates of economic growth and inverse at high rates.

61) Most economists agree that the target rate of inflation for central banks should be

A) between 7 and 9 percent.
B) less than zero.
C) above zero for fears of deflation.
D) something over 3 but less than 6 percent.

62) The problem for a central bank setting a zero-inflation policy would be that

A) there is risk of high employment.
B) it is impossible to have zero inflation.
C) firms would have to cut the nominal wage to reduce the real wage.
D) economic growth would also have to be zero.

63) Higher than expected inflation will increase the

A) real interest rate borrowers pay on fixed rate mortgages.
B) nominal amounts people need to save for retirement.
C) real interest rate savers earn on fixed rate CDs.
D) real interest rates both paid on mortgages and earned on CDs.

64) The main problem from inflation as seen by most economists is that

A) inflation raises prices more than wages.
B) inflation harms lenders more than it benefits borrowers.
C) during periods of inflation some prices fall.
D) inflation creates risk.

65) In terms of economic growth, the central bank would like to

A) have the maximum growth rate possible.
B) keep the growth rate averaging zero.
C) keep the economy close to its potential or sustainable rate of growth.
D) balance every recession with a boom.

66) Potential output depends on all of the following except which one?

A) technology
B) the number of firms in the economy
C) the size of the capital stock
D) the number of people who can work

67) Over very long periods, U.S. real economic growth has averaged around

A) 3 percent per year.
B) 1 percent per year.
C) 5 percent per year.
D) 7 percent per year.

68) Everything else equal, if the growth rate of a country exceeds its sustainable rate, the central bank

A) will keep interest rates low to keep the momentum.
B) will now identify this new rate as the sustainable rate and try to maintain it.
C) is likely to raise interest rates to slow the rate of growth.
D) is likely to lower the interest rate thinking a slowdown is coming to offset this boom.

69) Which one of the following statements is not true?

A) Periods of growth above the potential level are periods of high employment.
B) Periods of growth below the potential level are periods of low unemployment.
C) Periods of growth above the potential level are periods of low unemployment.
D) Periods of growth below the potential level are periods of high unemployment.

70) All of the following are consequences of an economy operating above its potential level except which one?

A) high rates of inflation
B) high interest rates
C) low unemployment
D) stable prices

71) The relationship between stability and economic growth is best summarized by which one of the following statements?

A) Stability results in higher output growth rates.
B) Inflation volatility results in higher output growth rates.
C) There is no correlation between the volatility in growth rates and annual output growth.
D) The more volatile the growth rate, the higher is the annual output growth.

72) At a growth rate of 6 percent an economy will double in size in

A) 7 years.
B) 14 years.
C) 12 years.
D) 6 years.

73) Since the Federal Reserve was created, it has

A) averted all financial panics that could have plagued the U.S. economy.
B) averted a few financial panics but not most.
C) improved its skill at securing financial stability.
D) proved to be much better at preventing international panics than domestic ones.

74) Keeping interest rates stable is

A) the most important goal for a central bank.
B) a key goal, because stable interest rates will result in all other goals being achieved.
C) a secondary goal for central banks.
D) not a goal of the central bank.

75) Interest rate volatility is a problem because it

A) adds to uncertainty, thereby diminishing an investment.
B) decreases risk.
C) can impact productivity in a positive way.
D) can make financial decisions less difficult.

76) Central banks are in a position to control risk in the economy because they control

A) the unemployment rate.
B) the economy's real growth rate.
C) short-term interest rates.
D) tax rates.

77) Exchange rate stability is likely to be a more important goal for the central banks of

A) emerging market economies than the central bank of the United States.
B) the United States and Japan than most small developing countries.
C) countries where exports and imports make up a small total of all economic activity.
D) large, closed economies.

78) Which one of the following would give the most importance to the goal of exchange rate stability?

A) large, closed economies
B) the United States and Japan and other developed countries
C) emerging market countries where exports and imports are central to the structure of the economy
D) Europe

79) The 1990s saw inflation fall and real growth increase in the United States and in many other countries. This is partially attributed to all of the following except which one?

A) technological innovation
B) redesign of many central banks
C) central banks becoming better at their jobs
D) central banks focusing more on exchange rates in a global environment

80) A time-consistent policy is one where

A) actions are taken each month on the same day.
B) a future policymaker lacks the opportunity or incentive to renege.
C) there is means and motivation to break the commitment in the future.
D) policymakers operate with complete discretion now and in the future.

81) Time consistency is critical for economic policy to be credible because

A) people make decisions today with no regard for the future.
B) the ability to update decisions over time is necessary for policy to be effective.
C) it is not possible to improve outcomes by limiting discretion in future time periods.
D) an effective policy is a strategy for the future, so it must be costly for policymakers to renege.

82) Successful monetary policy relies most on

A) luck.
B) the institutional environment.
C) having an ample supply of highly qualified people.
D) knowledgeable citizens who know how to react to the policy.

83) Most economists agree that a well-designed central bank would

A) be independent of political pressure.
B) make its policy actions difficult to interpret.
C) be accountable only to other banks.
D) be run by one key policy maker.

84) There is a strong consensus among economists that monetary policy is more effective when it is formulated

A) by an individual rather than a committee.
B) in secrecy without the reasoning behind it being revealed for many years.
C) in a manner that keeps financial markets guessing.
D) independently of political pressure.

85) The idea that central banks should be independent of political pressure is an idea that

A) has been around since there were central banks.
B) is relatively new.
C) every central bank was founded upon.
D) became quite popular in the early 1900s.

86) To be independent, a central bank must have

A) policies that can be overturned only by the president.
B) control of its own budget.
C) board members who are appointed for very short terms.
D) the chairperson serve as a member of the president's cabinet.

87) The operational components required for truly independent central banks include

A) a budget controlled by Congress.
B) the ability to have policies reversed by Congress or the president.
C) monetary policies that cannot be reversed by anyone outside of the central bank.
D) the chairperson of the bank being answerable only to the president.

88) The interest rate decisions made by the Federal Open Market Committee

A) can be overridden by the president.
B) can be overridden by the Secretary of the Treasury.
C) can be overridden by the U.S. Senate by a two-thirds majority.
D) cannot be overridden by anyone outside of the Federal Reserve.

89) One argument for an independent central bank is that

A) successful monetary policy requires a long time horizon, usually well beyond the next election of most public officials.
B) without independence, competent people would not take a position in a central bank.
C) the central bank usually hires more competent individuals than the Treasury Department or other finance ministries.
D) central bankers have a short-run focus that usually corrects problems faster.

90) Compared to an independent central bank, elected officials are likely to

A) favor long-run stability over short-term prosperity.
B) sacrifice short-term growth to keep future inflation low.
C) choose monetary policies that are overly accommodative.
D) prefer interest rates to vary more often.

91) Empirical research seems to verify that

A) countries that have less independent central banks experience lower rates of inflation.
B) countries with high rates of inflation seem to have central banks with low levels of independence.
C) there is no relationship between the independence of central banks and rates of inflation.
D) the rate of inflation seems to vary directly with the amount of central bank independence.

92) Beginning in July of 2018, President Donald Trump openly and frequently criticized the Federal Reserve and its Chairman Jay Powell. Blatantly undermining the independence of the Fed in this way would likely

A) add a risk premium, driving down prices of U.S. assets.
B) cause the Fed to change course and move in the opposite direction of Trump’s wishes.
C) result in the Fed carrying out the monetary policy recommended by President Trump.
D) illustrate the strength of the U.S. economy and encourage investment from abroad.

93) In the United States, monetary policy is formed by

A) an individual advised by a close group of people.
B) committee.
C) the president and approved by Congress.
D) the Chairman of the Federal Reserve and can only be overturned by the presidents of the Regional Federal Reserve Banks.

94) Most central banks of industrialized countries have monetary policy formed by

A) an individual, usually the minister of finance.
B) their version of Congress.
C) a committee made up of members of their central bank.
D) an individual, usually the person heading the central bank at the time.

95) In the United States, one problem with central bank independence is that

A) it is almost impossible to obtain because Congress controls the budget of the Federal Reserve.
B) in a representative democracy, monetary policymakers must be held accountable to the public.
C) central bank independence has not produced favorable results.
D) the central bank can control policy, but the U.S. Treasury controls the money supply.

96) Central bank accountability means that central bankers

A) will report on the progress of goals that are established by politicians.
B) are not accountable to any elected officials.
C) are only accountable to the banks in their respective countries.
D) must hold press conferences to explain their monetary policy views.

97) During the financial crisis of 2007–2009 the U.S. Federal Reserve used its powers in all but which one of the following ways?

A) lending to nonbanks
B) accepting very illiquid collateral against its loans
C) lowering bank reserve requirements
D) lowering its policy rate to zero

98) In a survey of forecasters toward the end of the financial crisis of 2007–2009, forecast inflation rates for the next decade in the United States were

A) 0 percent.
B) 2 percent.
C) 4 percent.
D) 7 percent.

99) To say monetary policy is transparent implies that

A) anyone could figure out what the correct policy should be.
B) monetary policy should not be so difficult that most people couldn't understand it.
C) policy makers offer plausible explanations for their decisions along with supporting data.
D) when faced with the same problem, policy makers will always react the same way.

100) The means for assuring accountability and transparency

A) may differ across the central banks of different countries.
B) are the same for all successful central banks.
C) involve setting specific numerical targets so there is no confusion as to what the goal is.
D) are opposite to each other so that increasing one means decreasing the other.

101) In the United Kingdom accountability and transparency for its central bank is achieved by setting

A) a numerical target for unemployment each year.
B) a numerical target for economic growth.
C) numerical targets for economic growth and the exchange rate.
D) an explicit numerical target for inflation.

102) The central bank for the euro area tries to achieve accountability and transparency through

A) a standard numerical objective for inflation over the medium term.
B) a specific target for unemployment and economic growth.
C) following the monetary policy guidance of the European Parliament.
D) a specific target for the dollar euro exchange rate.

103) Setting an explicit numerical inflation target is most associated with the goal(s) of

A) transparency.
B) accountability.
C) both transparency and accountability.
D) neither transparency nor accountability; it's about moral hazard.

104) In the United States, the Federal Reserve is asked to

A) deliver on a specific inflation target set by Congress.
B) meet an explicit target for economic growth.
C) meet a specific target for unemployment each year.
D) deliver price stability as one of a number of objectives.

105) Today, most central banks announce their policy actions

A) one year after the policy is put in place.
B) almost immediately.
C) within a three- to five-year "window".
D) usually six months after the policy is put in place.

106) The Federal Reserve's policy regarding announcing its policy decisions has

A) always been to announce it immediately because this was part of the original Federal Reserve Act of 1913.
B) only recently gone to immediate announcement; until 1994 these policy decisions were secret.
C) been to release the decisions immediately since its early failure at preventing the Great Depression.
D) changed so that now the Fed does not release its decisions publicly.

107) One reason given for more central bankers releasing decisions publicly is that

A) for monetary policy to work, people must be taken by surprise.
B) most people do not understand monetary policy so it really doesn't do any harm to release the decisions publicly.
C) it gives central banks across the world a chance to coordinate their policies.
D) monetary policy is more effective when households and businesses can understand and anticipate it.

108) Central bank statements in developed countries

A) are similar both in length and in the speed with which policy changes are announced.
B) differ both in length and in the speed with which policy changes are announced.
C) are similar in length but differ in the speed with which policy changes are announced.
D) differ in length but are similar in the speed with which policy changes are announced.

109) The monetary policy framework is

A) the law that created the Federal Reserve System.
B) the idea that central banks should be interconnected across countries.
C) a way to prioritize and implement the central bank’s objectives when they are in conflict.
D) a growing belief that there should be one central bank headquartered at the World Bank.

110) One reason for having a monetary policy framework is that it

A) makes clear what specific goals the central bankers are pursuing.
B) provides leeway for central bankers to change their goals without communicating the change and disrupting financial markets.
C) provides central bankers the secrecy needed to perform their jobs effectively.
D) can make goal setting vague enough so that the central bankers can always claim success.

111) A monetary policy framework is used to clarify all of the following except which one?

A) the likely response when policy goals are in conflict with one another
B) the goal that is currently receiving the most attention
C) how goals will be measured
D) why zero inflation is not desirable

112) One problem for the Federal Reserve regarding setting policy stems from the fact that

A) there are multiple goals that may be inconsistent with each other.
B) there are more policy instruments than goals.
C) Congress sets very tight goal ranges that the central bankers must hit.
D) the membership of its governing board changes so often.

113) Whenever central bankers face more than one goal, the policy framework requires

A) central bankers to always focus on inflation first.
B) central bankers to focus on all goals, no matter what.
C) economic growth to be the top priority.
D) central bankers to make their priorities clear.

114) The ability to control inflation expectations is most closely related to a central bank's

A) transparency.
B) credibility.
C) accountability.
D) willingness to communicate.

115) One thing that is true about economic policy in the United States is that

A) fiscal and monetary policy never conflict.
B) monetary and fiscal policy need not, but may, conflict.
C) monetary policy ultimately controls fiscal policy since the Fed controls the money supply.
D) fiscal policy ultimately controls monetary policy since Congress can control the Fed's budget.

116) In the United States, monetary policymakers

A) tend to have a long view while fiscal policymakers tend to ignore the long-run inflationary ramifications of their actions.
B) focus most of their attention on the money supply and the exchange rate while fiscal policymakers tend to focus on inflation and unemployment.
C) tend to focus less on pleasing constituents while fiscal policymakers are more willing to sacrifice the short run for the long run.
D) observe monetary policy independence because it is enshrined in the U.S. Constitution.

117) For fiscal policymakers, one of the results of an independent central bank is that

A) to finance government spending, the Treasury has to order more currency from the central bank.
B) fiscal policymakers always have to borrow to increase spending.
C) fiscal policymakers cannot borrow unless the Federal Reserve prints more money.
D) increased government spending has to be financed with either higher taxes or increased government borrowing.

118) Fiscal policymakers may actually welcome some inflation for all of the following reasons except which one?

A) It potentially raises tax revenues.
B) It reduces the real value of the national debt allowing governments to "default" on a portion of their debt.
C) Interest payments tend to be fixed so the real interest payments are reduced.
D) It weakens the independence of the central bank.

119) If a government were to find that it cannot raise taxes any further, and it cannot borrow any further from financial markets, the government

A) cannot increase its spending any further.
B) can increase spending by having the central banks purchase its bonds.
C) is in default.
D) can decrease the amount of money in circulation.

120) The autonomy of modern central banks means that governments cannot increase their spending by

A) raising taxes.
B) issuing bonds.
C) printing money.
D) either issuing bonds or printing money; both represent debt.

121) Which one of the following is evidence of the link between persistent increases in public debt and slower long-run growth?

A) fiscal dominance
B) a declining equilibrium real interest rate
C) increased concern about debt sustainability
D) a budget surplus that is less than the risk premium times the level of debt

122) What is needed in order to keep inflation low over the long run?

A) fiscal policy that dominates monetary policy
B) time consistency of both monetary and fiscal policy
C) primacy of monetary policy regardless of fiscal policy
D) restrictive monetary policy coupled with expansionary fiscal policy

123) All of the following are true about central bank independence except that it

A) is usually given at the pleasure of governments.
B) can be eliminated by governments in a time of crisis.
C) is usually guaranteed by a country's constitution.
D) can be subverted by the actions of fiscal policymakers.