Adam? Posen, a member of the Bank of? England\'s Monetary Policy? Committee, was

Question

Adam? Posen, a member of the Bank of? England's Monetary Policy? Committee, was quoted as arguing in a speech? that: Central? banks' purchases of government debt . . . far from undermining their independence . . . should enhance their credibility. . . . Mr. Posen? said, . . .? "What matters for our independence is our ability to say no and to mean? it, and to be responsible about when we choose to say? yes." ?Source: Natasha? Brereton, "BOE's Posen Defends? ECB's Actions," Wall Street Journal?, June? 15, 2010. Why might purchasing government debt be seen as undermining a central? bank's independence?

A. When the central bank purchases government? debt, it serves as a way for the government to spend money without having to pay for it.

B. Purchasing government debt is almost like printing money.

C. If the Bank of England starts purchasing government? debt, it may be interpreted as a sign that the government is forcing the Bank of England to monetize the debt.

D. All answers are correct.

Which answer is correct?

Explanation / Answer

Solution-

The correct option is D. All answers are correct.

Reason-

Central Bank Independence is an idea which has come out of the flaw in the advanced economy.The economy is in danger now and it is not about politicians, the Economist said. The problem is that in recent years, interest rates have dropped continuously, many countries have negative interest rates. The monetary policy will no longer be effective and it will block the central bank's authority.Moreover, the tools used by some banks are numerical relative, which includes huge purchases of government bonds, in the amount of money to purchase government debt using new printed money - exactly what the central bank aimed at avoiding the independence!

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