Critics of the Federal Reserve maintain that, to correct the credibility problem of monetary policy, the Fed should:
A)tighten monetary policy.
B)be required to maintain a growth rate of the money supply that is fixed by law.
C)give more power to the Federal Open Market Committee.
D)ignore public opinion and establish more discretionary power over monetary policy.
E)merge with the U.S.Treasury and be dissolved as an independent agency.

Question

Quizplus · Accepted Answer

Requiring the Fed to maintain a fixed growth rate of the money supply would bring more predictability and transparency to monetary policy, increasing its credibility. However, this would also limit the Fed's ability to respond to changing economic conditions, which is a disadvantage.

Critics of the Federal Reserve Maintain That, to Correct the Credibility