1.[]

The ability of a central bank to set monetary policy instruments is

Apolitical independence.

Bgoal independence.

Cpolicy independence.

Dinstrument independence.

2.[] The case for Federal Reserve independence does NOT include the idea that

Apolitical pressure would impart an inflationary bias to monetary policy.

Ba politically insulated Fed would be more concerned with long-run objectives and thus be a defender of a sound dollar and a stable price level.

Cpolicy is always performed better by an elite group such as the Fed.

Da Federal Reserve under the control of Congress or the president might make the so-called political business cycle more pronounced.

3.[] Goal independence is the ability of ________ to set monetary policy ________.

Athe central bank; goals

BCongress; goals

CCongress; instruments

Dthe central bank; instruments

4.[] The strongest argument for an independent Federal Reserve rests on the view that subjecting the Fed to more political pressures would impart

Aan inflationary bias to monetary policy.

Ba deflationary bias to monetary policy.

Ca disinflationary bias to monetary policy.

Da countercyclical bias to monetary policy.

5.[] Members of Congress are able to influence monetary policy, albeit indirectly, through their ability to

Awithhold appropriations from the Board of Governors.

Bwithhold appropriations from the Federal Open Market Committee.

Cpropose legislation that would force the Fed to submit budget requests to Congress, as must other government agencies.

Dinstruct the General Accounting Office to audit the foreign exchange market functions of the Federal Reserve.

6.[] The theory of bureaucratic behavior suggests that the objective of a bureaucracy is to maximize

Athe public's welfare.

Bprofits.

Cits own welfare.

Dconflict with the executive and legislative branches of government.

7.[] Critics of the current system of Fed independence contend that

Athe current system is undemocratic.

Bvoters have too much say about monetary policy.

Cthe president has too much control over monetary policy on a day-to-day basis.

Dthe Board of Governors is held responsible for policy missteps.

8.[] The theory of bureaucratic behavior when applied to the Fed helps to explain why the Fed

Awas supportive of congressional attempts to limit the central bank's autonomy.

Bwas so secretive about the conduct of future monetary policy.

Csought less control over banks in the 1980s.

Dwas willing to take on powerful groups that may threaten its autonomy.