Which of the following arguments is often used by opponents of Federal Reserve independence?
A) Independence slows the policy decision process.
B) Independence causes inflationary pressures to build because of excessive monetary growth.
C) Independence leads to conflicts between monetary and fiscal policy.
D) Independence causes a concentration of financial power.

Question

Quizplus · Accepted Answer

Opponents of Federal Reserve independence argue that it can lead to conflicts between monetary and fiscal policy. This is because the Fed sets interest rates and controls the money supply, while the government sets fiscal policy (spending and taxes). Without independence, the government may pressure the Fed to pursue policies that are politically popular but may not be in the best interest of the economy as a whole. This can lead to inflation or other economic problems. However, it should be noted that there is considerable debate over the pros and cons of Fed independence, and many economists and policymakers believe that it is essential for maintaining economic stability.

Which of the Following Arguments Is Often Used by Opponents