Political independence

The Federal Reserve System (the Fed) has a large measure of political independence. The Board of Governors, appointed by the U.S. president and confirmed by the U.S. Senate, serves 14-year terms. In addition, the Federal Open Market Committee includes representatives of private banks in the Federal Reserve System.
Consider the role of the Fed in the economy and respond to the following:
What are the best goals for the Fed? Why?
How does the structure of the Fed insulate monetary policy decision makers from political pressure?
How does the fractional reserve system limit a bank’s ability to create money?
What is the difference between the federal funds rate and the discount rate? Be sure to explain the differences in how these two rates are determined.

Last Updated on February 10, 2019

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