a. Why is it important for a central bank to be independent. Describe at least two...
a. Why is it important for a central bank to be independent. Describe at least two potential problems with central banks that lack independence in detail.
Furthermore, what are macroprudential policies? Describe a policy and its intended effect.
Homework Answers
Ans
1 Because without its independence economy ultimately suffers.
The two problems are monetisation of Govt debt and huge inflation in economy. Other problem is frequent financial crisis resulting from irrational policies implemented to satisfy ruling politicians
Macropreudential policies are policies that are good for economy. One such policy is increasing money supply during depression to stimulate AD and thus bring economy out of depression
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