There are (5/7/12) members of the Fed Reserve Board of Govenors. Which of the fo

Question

There are (5/7/12) members of the Fed Reserve Board of Govenors.

Which of the following contributes to making the Federal Reserve an independent policymaking body?

__ There are 12 Federal Reserve banks.

__ Members of the Board of Governors are appointed for 14-year terms.

__ Its role is written into the U.S. Constitution.

The Federal Reserve's primary tool for changing the money supply is the (discount rate / open market operation/ reserve requirement). In order to increase the number of dollars in the U.S. economy (the money supply), the Federal Reserve will (buy/sell) government bonds.

Explanation / Answer

Federal Reserve Board of Governors is comprised of seven members.

So,

There are 7 members of the Fed Reserve Board of Governors.

The most important trait that makes the Federal Reserve an independent policy making body is the fact that members of Board of Governors are appointed for 14-year terms. This insulates board from political pressure.

Hence, the correct answer is the option (2) [Members of the Board of Governors are appointed for 14-year terms].

The Federal Reserve's primary tool for changing the money supply is the open market operation.

In order to increase the number of dollars in the U.S. economy (the money supply), the Federal Reserve will buy government bonds.

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