1. The Fed does not have to go through the normal congressional appropriations p
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Question
1. The Fed does not have to go through the normal congressional appropriations process because A) its expenses are very small. B) it was given enough funds at the time of its founding to provide for its expenses indefinitely. C) it is self-financing. D) it is not part of the legislative branch of the federal government. E) it’s functions are Constitutionally required and thus must be funded by Congress.
2. The issue of Fed independence is most often raised by A) disagreement over the role the Fed should play in managing monetary policy. B) the Fed's refusal to carry out the wishes of the President. C) the Fed's refusal to carry out the wishes of Congress. D) the public's negative reaction to Fed policy.
Explanation / Answer
1. Congressional appropriation is a legislative power in which the President has a major role to pass the bill with veto, which can only be over ridden by two-thirds vote of Congress. The Congress has to present a budget resolution and twelve seperate appropriation bills for every federal fiscal year. The Fed, however does not go through a normal congressinal appropriations process because it is a part of legislative branch of federal government and is an independent, self-financed body. It has huge expenses but was not provided with all the funds at the time of its founding.
Option C) is the answer.
2. Fed is an independent body which functions according to the changes in the financial health of the economy. Fed issues various policies to cope with the increasing or decreasing money supply, to regulate the interest rate to manage the country's exchange rate and inflation. Thus, Fed does not work on the wishes and demands of the people, but according to the changing scenarios of the economy's monetary policy. Hence, the issue of Fed's independence will be raised only when there will be a negative public reaction to Fed policy.
Option D) is the answer.
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