ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The Fed’s structure has been set up by Congress to ensure that monetary policy is insulated from political pressure. The Fed’s decisions are also protected from interference from other arms of the federal government. Specifically, policy and operational decisions do not require approval from Congress or the President.

Detailed explanation-2: -Appointments to the Board of Governors are staggered-one Governor’s term expires every two years. Terms are staggered to provide the Fed political independence as a central bank, ensuring that one president cannot take advantage of his power to appoint Governors by “stacking the deck” with those who favor his policies.

Detailed explanation-3: -The Federal Reserve conducts the nation’s monetary policy by managing the level of short-term interest rates and influencing the availability and cost of credit in the economy. Monetary policy directly affects interest rates; it indirectly affects stock prices, wealth, and currency exchange rates.

Detailed explanation-4: -Supervising and Regulating Financial Institutions and Activities. The Federal Reserve promotes the safety and soundness of individual financial institutions and monitors their impact on the financial system as a whole.