Question

One of the ways the Federal Reserve carries out its responsibilities for conducting monetary policy is by trying to affect the level of key interest rates. In early​ 2016, Federal Reserve Chair Janet Yellen met with President Barack Obama in the White House. According to an article in the Wall Street Journal​, a spokesman for the president stated that he ​'would not​ anticipate' that Ms. Yellen would go into detail on the path of interest rates at the meeting . . . ​Source: David​ Harrison, Barack ​Obama, Janet Yellen Discuss​ Economy, Regulation at White ​House, Wall Street Journal​, April​ 11, 2016. Which best describes why the president and Ms. Yellen did not discuss interest​ rates? A. They did not have enough time. B. It is important for the Fed to maintain its independence. C. The Federal Reserve is not a government organization. D. The president does not set interest rates.

Answer 1

Answer: B. It is important for the Fed to maintain its independence.

Step-by-step explanation:

The Fed is supposed to be an Independent central bank that is free of Government control. This ensures that their actions will not be thought to be politically motivated as thought of this will impact the market.

As the Fed initiates policy that affects the interest rate in the economy, it is important that they are viewed as independent because if investors fear that interest rates are being politically motivated, there might be upheaval in the market as investors become worried about the ramifications of political interest rates.