Recent research indicates that inflation performance low inf

Recent research indicates that inflation performance (low inflation) has been found to be best in countries with

A) a policy of always keeping interest rates low

B) money financing of budget deficits

C) political control of monetary policy

D) the most independent central banks

Solution

ans :

option b is not suited because money financing lead to rising inflation and not low inflation

option a is also not suited because low interest rate tend to rise investments which further increases AD and thus rising prices or inflation.

left with C & D , then C is eliminated because if their is political control of monetary policy they will want to reduce unemployment so secure their votes and we know unemployment and inflation have an inverse relationship.

thus, the correct answer is option D as independent central banks tend to focus n reducing inflation.