Question
Evaluate the following statement: Because the Fed does not have to ask Congress for money to fund its operations, the principal-agent view of the Fed's
Evaluate the following statement: "Because the Fed does not have to ask Congress for money to fund its operations, the principal-agent view of the Fed's motivation cannot be correct."
a- Since the Fed is completely independent of Congress, there is no principal-agent relationship at all, so the principal-agent view of the Fed's motivation cannot be correct.
b- This statement is accurate since the Fed's financial independence from the congressional budgeting process effectively means there is no principal for the agent to go against.
c- This is not necessarily correct. For instance, despite the apolitical setup of the Fed, each member of the Federal Reserve Board still has an incentive to maximize personal well-being, power, and influence, and may make decisions that promote those factors.
d- The principal-agent view of the Fed's motivation has no connection with Fed independence from Congress.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started