Question: 7. Based on the below graph, some argue that making the central bank independent from the government gives inflation targets credibility and prevents an inflation

7. Based on the below graph, some argue that making the central bank independent from the government gives inflation targets credibility and prevents an inflation spiral by setting expectations. Do you agree with this argument? 14 Portugal . Greece 12 Line of best fit Spain 10 Italy New Zealand 8 UK . Australia Average inflation rate, 1962-1990 (%) France . Canada 6 Japan . Belgium . US A Austria Netherlands Switzerland Germany 2 0 0 2 4 6 8 10 12 14 Central bank independence index, mid-1980s

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