Question

you have learned that the Board of Governors is a federal government agency, while the 12 Reserve banks are independent of the government. A lot of thought went into this arrangement to ensure the best "mix" of government oversights and monetary independence. How would you explain the makeup of the Federal Reserve System, and in what ways does this design serve the government and the public?

Answer 1

Since time immorial we have seen a tussle between FED and the government as both their policies usually dont go hand in hand.

FED will be working for the economy as a whole but government works mainly towards people so that they can get the confidence of people and that would help in the next voting season. For example Fed wants to reduce inflation at the cost of unemployemnt (phillips curve) but government will want to reduce unemployemnt at the cost of inflation!

A perfect mix of government and the FED is very importtant and for that they need to come to a consensus, where they come to point in which fiscal policies are in line with the monetary policies. They need to have a future action plan in which govenment will but their agendas and FED will look into its poilicy that will go in line with the government agendas.

This is very important to maintain or else fiscal policies and monetary policies can go heywire!