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Chapter 14: Q5. (page 301)

An important reason why members of the Federal Reserve鈥檚 Board of Governors are each given extremely long, 14-year terms is to:

a. insulate members from political pressures that could result in inflation.

b. help older members avoid job searches before retiring.

c. attract younger people with lots of time left in their careers.

d. avoid the trouble of constantly having to deal with new members

Short Answer

Expert verified

The correct answer is option a) insulate members from political pressures that could result in inflation.

Step by step solution

01

Step 1. Explanation for the correct answer

The governors are appointed for a term of 14 years, and one member is replaced every two years. The advantage of the long-term appointment is that it provides continuity to the board, experienced membership and free the members from political pressure that will result in inflation.

02

Step 2. Explanation for incorrect options

The 14-year term is not set for the comfortability of the senior members. It is set for the easy and smooth functioning of the Federal Reserve. So option b. is incorrect.

The long term is also not to attract the youngsters to the post. The Board of Governors consists of experienced members, and youngsters are not much considered to such a prestigious position.

Continuity is one of the aims, but every two years, one member is replaced on the board. So there is a scope of dealing with new members every two years. So option d. is also incorrect.

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Most popular questions from this chapter

Assume that the following asset values (in millions of dollars) exist in Ironmania: Federal Reserve Notes in circulation = \(700; Money market mutual funds (MMMFs) held by individuals = \)400; Corporate bonds = \(300; Iron ore deposits = \)50; Currency in commercial banks = \(100; Savings deposits, including money market deposit accounts (MMDAs) = \)140; Checkable deposits = \(1,500; Small-denominated (less than \)100,000) time deposits = \(100; Coins in circulation = \)40.

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