What are the main arguments for and against Fed independence?
What will be an ideal response?
The main argument for Fed independence is that monetary policy, which affects inflation, interest rates, exchange rates, and economic growth, is too important and technical to be determined by politicians. Because of the frequency of elections, politicians with a desire to get reelected may be concerned with short-term benefits without regard for potential long-term costs. Also, independence decreases the likelihood of being influenced by political pressure prior to elections, such as politicians pressuring for increases in the money supply to increase GDP and employment, at the risk of increasing inflation in the long run.
The main argument against Fed independence is also the importance of monetary policy for the economy. Supporters claim that in a democracy, elected officials should make public policy. Also, placing the Fed under the control of elected officials could be beneficial by coordinating and integrating monetary and fiscal policies.
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A) overestimated, overestimated B) overestimated; underestimated C) underestimated; overestimated D) underestimated; underestimated
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Union membership was relatively low during the Great Depression
a. True b. False Indicate whether the statement is true or false