Question

If we found evidence that the Fed did easy money policy shortly before the election for President of the USA, this might lend support to the idea of ________________; there is ____________ evidence of this happening in the USA.

Group of answer choices

A. the principal-agent problem; not much

B. the political business cycle; not much

C. the principal-agent problem; a great deal of

D. the political business cycle; a great deal of

Answer 1

Option B is correct

A political business cycle is basically business cycle influenced by politics. This implies that politicians attempt to influence the business cycle by moderating the fiscal policy so the incumbent government appears to be reducing the rate of inflation increasing the level of output and thus attempts to stimulate the economy when the next election approaches. However there is not much evidence available for the fact that federal reserve has been involved in such practices.