Question: Evaluate the following statement: Because the Fed does not have to ask Congress for money to fund its operations, the principal-agent view of the Fed's
Evaluate the following statement: "Because the Fed does not have to ask Congress for money to fund its operations, the principal-agent view of the Fed's motivation cannot be correct."
a- Since the Fed is completely independent of Congress, there is no principal-agent relationship at all, so the principal-agent view of the Fed's motivation cannot be correct.
b- This statement is accurate since the Fed's financial independence from the congressional budgeting process effectively means there is no principal for the agent to go against.
c- This is not necessarily correct. For instance, despite the apolitical setup of the Fed, each member of the Federal Reserve Board still has an incentive to maximize personal well-being, power, and influence, and may make decisions that promote those factors.
d- The principal-agent view of the Fed's motivation has no connection with Fed independence from Congress.
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