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Explain Two Concepts of Central Bank Independence

question 69

Essay

Explain two concepts of central bank independence. Is the Fed politically independent? Why do economists think central bank independence is important?


Definitions:

Compromise Mechanism

A conflict resolution strategy where parties involved in a dispute reach an agreement by making concessions and finding a middle ground.

Defense Mechanisms

Psychological strategies employed unconsciously to protect an individual from anxiety and perceived threats to self-esteem or self-concept.

Compensation

A compromise mechanism in which an individual attempts to make up for a negative situation by devoting himself or herself to another pursuit with increased vigor.

Conflict Management Techniques

Strategies and practices used to address and resolve disagreements and disputes in a constructive manner.

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