Advocates of Fed independence fear that subjecting the Fed to direct presidential or congressional control would

Question

Quizplus · Accepted Answer

Advocates of Fed independence fear that direct political control could lead to short-term decision-making based on political considerations rather than the long-term objective of price stability, which could lead to an inflationary bias in monetary policy. Sacrificing this long-run objective could also lead to economic instability. However, it is unlikely that direct political control would eliminate the political business cycle entirely, as politicians may still have an incentive to use monetary policy to smooth the economy in the short term for electoral purposes.

Advocates of Fed Independence Fear That Subjecting the Fed to Direct