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Unformatted text preview: Which of the following contributes to making the Federal Reserve an Independent policymaklng body? 0 There are 12 different Federal Reserve banks. 0 Its role is written Into the LLS. Constitution. of 0 Members of the Board of Governors are appointed for 14-year terms. Explanation: an" A Because members of the Fedelal Reserve Board of Governors are appointed for 14-year terms, and because a president can serve at most B years in office, the president cannot change the makeup of the Board very much. Furthermore, the 14-year tenn Is nonrenewable, so Board members do not feel pressured to enact particular policies to secure reappointment. For both of these reasons, Board members are largely insulated from political pressures and can therefore make judgments based solely on the economic needs of the country. The Fed‘s primary tool for changing the money supply Is the open-market operation 1" . In order to Increase the number of dollars In the LLB. economy {the money supply], the Fed will buy of LLS. govemment bonds. Explanation: up“ A The open-market operation Is the Fed‘s primary tool for controlling the money supply. lDperl-maricet operatlons involve buying and selling U.5. government bonds. To increase the money supply, the Fed creates dollars with which to purchase government bonds from the public. After the purchase, the Fed has bonds and the public has new dollars-an increase in the money supply. To reduce the money supply, the Fed sells U5. government bonds to the public. After the sale, the public has bonds and the Fed has taken dollars out of circulation, thereby reducing the money supply. ...
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