Monetary policy is executed by the semi-autonomous Federal Reserve System (the F

Question

Monetary policy is executed by the semi-autonomous Federal Reserve System (the Fed) that was established at the beginning of the 20th century. The justification for the autonomous nature is to allow rapid intervention in the money system to prevent wild swings in economic activity. It targets the money supply and inflation. Some have proposed that the Fed should have more connection to the legislative branch of government and others think it is fine just as it is. Given that a central bank is deemed a necessity in a free market economy should we leave it as it is or place more legislative controls?

Explanation / Answer

Government can control the market by fiscal policy i.e, by changing govt expenditure and taxes in the economy.So,we should leave it as it is because there should be a legislative which has a autonomous in nature and can control the market independent of government.

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