Macroeconomics Assignment 7 .docx

Macroeconomics Assignment 7 .docx - Macroeconomics...

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Macroeconomics Assignment 7 The FED o Originally decentralized, now single organization with 12 ‘branches’ o Considerable independence- created by Congress, can be changed by them Why? Independent Central Banks conduct better policies – less inflation/same unemployment Without independence, tendency to over expand Ms -> inflation Much current debate on how independent Fed should be going forward o 12 member banks, Board of Governors – 7 members, 14 year, non-renewable terms, one is appointed by President with consent of Senate for 4 year term as chair. o FOMC central policy group – 7 BOG members, 5 Bank Presidents, rotating (NY Fed always on FOMC) Meet 8 times a year, statement, directive to Open Market Desk – NY Fed o Fed Goals (set by Congress) – They have two – a dual mandate – stable prices and maximum employment in that order (moderate long-run rates follow from these, and many believe the maximum employment in the long-run follows from price stability) o Fed Balance Sheet
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