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Economics:

10th Edition
BOYES + 1 other
Publisher: Cengage Learning
ISBN: 9781285859460

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BuyFindarrow_forward

Economics:

10th Edition
BOYES + 1 other
Publisher: Cengage Learning
ISBN: 9781285859460
Chapter 14, Problem 10E
Textbook Problem
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Suppose the Federal Reserve System were abolished and Congress assumed responsibility for monetary policy along with fiscal policy. What potential harm to theeconomy could result from such a change?

To determine

To explain:

The potential harm caused to the economy in the given conditions.

Explanation of Solution

If the Federal Reserve System gets abolished and monetary policy is controlled by Congress, it may become much politicized, especially in terms of short-term decision-making.

At present, the Board of Governors at the Federal Reserve decides monetary policy.The chairman is appointed by the President of the country. So, the board has an influence of politics. Many people have been criticized for being particularly politically motivated in relation to past chairmen...

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