Question

If the price level depends on both the current money supply and future expected money supplies, in order to stop a hyperinflation, a central bank may try to establish credibility by:

A) achieving increased political independence from the government.
B) increasing revenue from seigniorage.
C) encouraging increased government spending and tax cuts.
D) undertaking larger open-market purchases.

Answer 1

A) achieving increased political independence from the government.

Step-by-step explanation:

When the price level is depend on both current money supply and the expected money supply in the future

so here correct answer is A) achieving increased political independence from the government. Because as government policies are generally associated with high inflation, a shift away from a central bank government can lead to stability