What does the political business cycle refer to?
A) The ups and downs in overall business activity.
B) The political independence of the Fed's Board of Governors.
C) Politicians stimulate the economy before an election and tighten fiscal policy afterward.
D) Illegal behavior on the part of politicians and elected officials.

Question

Quizplus · Accepted Answer

The political business cycle refers to the tendency of politicians to manipulate fiscal policy in an attempt to stimulate the economy before an election, in order to increase their chances of re-election, and then tighten fiscal policy afterward to address any resulting inflationary pressures. This cycle can have negative consequences for the economy and undermines the independence of monetary policy.

What Does the Political Business Cycle Refer To