ECON 2035 : Ch. 11 (Test 3)
Document Summary
11 (15): central banks and the federal reserve system. View- curtailing the fed"s independence and subjecting it to more political pressures would impart (make known) an inflationary bias to monetary policy. **reduce fed independence, giving more pressure from politics, creates inflationary bias (prejudice) to monetary policy. Doesn"t have to respond to short-run problems of expansionary monetary policy and short-term political business cycle. Independent fed makes coordination of monetary and fiscal policy difficult fiscal policy is the use of government revenue collection (taxation) and expenditure (spending) to influence the economy. Discount rate: established by regional federal reserve banks, determined by board of governors. Set margin requirements, the fraction of the purchase price of the securities that has that has to be paid for with cash. Represents the u. s in negotiations with foreign gov. "s on econ matters. 5 federal bank presidents vote; all 12 provide input. Makes decisions concerning reserve requirements & discount rate: *does not officially set res.
