The main argument for Fed independence is that monetary policy which affects interest rates, inflation, exchange...

The main argument for Fed independence is that monetary policy which affects interest rates, inflation, exchange rates and economic growth is too important and technical to be determined by politicians Question 67 options:

True

False

Solutions

Expert Solution

The answer is True.

Since the Federal Reserve is subject to oversight by congress, it is said to have short-term political pressures. Without independence and autonomy, it could be influenced by politicians who are focused on elections.

They aim to enect expansionary monetory policy to reduce unemplyment in the short term, resulting in high inflation and failure to prevent long term unemplyment. It can also undermine the purchasing power of the currency.

Hence, it is true that the main argument for Fed independence is that monetary policy which affects interest rates, inflation, exchange rates and economic growth is too important and technical to be determined by politicians.

jeff jeffy answered 2 years ago

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