Question

When Kentucky Senator Rand Paul was running for the 2016 Republican presidential​ nomination, an article in the New York Times noted​ that:

open double quote“Mr.

Paul opposes the Federal​ Reserve's control of the money supply and interest​ rates, suggesting that such powers should be exercised by

Congress.close double quote”

​Source:

open double quote“Rand

Paul on the

​Issues,close double quote”

New York

Times​,

April​ 7, 2015.

Why does Congress directly control fiscal

policylong dash—the

federal​ government's decisions with respect to spending and

taxeslong dash—but

delegate the authority over monetary policy to the Federal​ Reserve?

A.

Member banks refused to join the Federal Reserve System unless they had authority over monetary policy.

B.

Congress​ doesn't have the expertise to set monetary policy.

C.

Congress​ wasn't able to agree on a monetary policy.

D.

Congress wanted the Federal Reserve to operate independently of external political pressures

Answer 1

The correct option is : D

This is because in every economy the monetary policy decision, mainly the manipulation of the money supply is taken by the central bank. The bank increase or decrease the supply of money as the situation needed. The money supply is a powerful tool to influence the economy. The government under various political pressure tends to print more money that it can raise or bridge the deficit. This increases inflation and hyperinflation decreases the value of the country's produce to jeopardize growth. Therefore, the control of the money supply should be given to such as authority that will remain free from political pressure and will not unnecessarily manipulate the money supply.