Reference no: EM131519189

1. The Board of Governors are elected for a 14-year non-renewable term. The board members’ tenure length and inability to be elected a second time is supposed to eliminate political pressure. Do you think political pressure is actually eliminated? Do you think attempting to eliminate political pressure is actually a good thing? Explain your answer.

2. The discount rate for primary credit is the second most commonly used monetary policy tool. However, banks rarely borrow money at the discount rate from the Federal Reserve. Provide three reasons why the discount rate plays such an important role in monetary policy (and the functionality of financial markets in general) even though banks do no frequently borrow money from the Federal Reserve.

3. The Fed recently announced that they were raising the federal funds rate in March. Explain the steps involved in increasing the interest rate. (i.e. what part of the Fed sets the interest rate, what part causes the rate to change, and what they do to change the interest rate).