Why Can It Be Argued That, While Interest Rate Decisions

question 75

Essay

Why can it be argued that, while interest rate decisions are made by the FOMC, a committee, the real power of the committee lies with the Chairman of the Federal Reserve System?

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Definitions:

Rational Expectations

The economic theory that assumes individuals make predictions about the future based on all available information and in a way that is systematically correct.

Policy Makers

Individuals or groups responsible for making decisions and establishing regulations that guide the operation of governments and organizations.

Inflationary Expectations

The beliefs that consumers, businesses, and investors have about future inflation rates, which can influence economic behavior and policy decisions.

Discretionary Policy

Involves government policies that are implemented through ad-hoc decisions by policymakers, rather than set by predetermined rules.