Final answer:
Presidents reappoint Federal Reserve Chairs for continuity and political insulation, maintaining stable monetary policy. Monetary policy is adaptable but potentially less effective in certain economic conditions. Moral hazard in banking regulations suggests that safety nets like deposit insurance can encourage riskier behaviors.
Step-by-step explanation:
Presidential Reappointment of Federal Reserve Chairs
Presidents typically reappoint Chairs of the Federal Reserve Board even when they were appointed by a president of a different political party due to the value of continuity in leadership and to insulate the Board from political forces. This practice helps to maintain a stable monetary policy that is not subject to frequent changes with political tides, allowing decisions to be made based on economic criteria rather than political ones.
Monetary Policy versus Fiscal Policy
Monetary policy may be considered superior to fiscal policy because it is more adaptable; it can be adjusted more quickly by the Federal Reserve to respond to economic changes. However, it might be considered inferior in certain respects, such as the potential to be less effective in situations where interest rates are already very low (liquidity traps) or when there's a need for structural economic reform that monetary policy alone cannot address.
Moral Hazard in Banking Regulations
The concept of moral hazard applies to deposit insurance and other bank regulations as it can encourage riskier behavior by banks. Knowing that deposits are insured may lead banks to make riskier investments, as the insurance mitigates the consequences of potential losses for depositors, effectively shifting the risk to the insurance provider.