ECON 2301 Unit 6


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Unit 6: Monetary Policy



A.  Read the following selections from the Margin Notes by clicking on each link.


B.  Watch these presentations. When you click on one of the links below, a new screen will pop up. Use the scrollbar on the side of the new screen to navigate. You need Adobe Reader to view PDF files.


C.  (Optional) Read the following chapters from the textbook.

Chapters 08 - 10


D.  The following Optional Links will help you do better in your course but they are not required.


E.  Critical Thinking Essay (20 points)To Do Note

A critical thinking essay isn't difficult to write but it is a very structured piece of writing so itís important that you read and follow the steps below in order.

  1. Read What is Critical Thinking? before you do any work on your essay. We cannot take the time to fully explore what is meant by critical thinking. You do, however, need to have some general idea what critical thinking means in order to write a good critical thinking essay.

  2. Read What is a Critical Thinking Essay? before you go any farther. A critical thinking essay is very similar to an exploratory essay -- a type of writing with which you may be familiar. It has a specific focus and a specific structure. Donít try to wing this assignment!

  3. Look at your topic carefully and make sure you understand it. Try rewriting it using your own words but keeping the meaning the same


Federal ReserveThe Federal Reserve System is the most important regulatory agency in our entire economy and is considered the countryís monetary authority. The Fed's major role is to regulate the supply of money in the economy. Many politicians would love to have some say in monetary policy, especially just before elections. They would at that time love interest rates to fall, enabling more workers to find jobs. Happy workers vote for incumbents.

Congress created the Fed in an attempt to remove exactly that kind of political manipulation from monetary policy. Because of that, the Fed has a large measure of political independence. The central banks of other countries generally have less independence than the US Fed. The Board of Governors, appointed by the US president and confirmed by the US Senate, serve 14-year terms. In addition, the Federal Open Market Committee includes representatives of private banks in the Federal Reserve System. As a result, the Fed can take actions that cancel out fiscal policy decisions made by Congress. The Chair of the Federal Reserve is described by some as the most influential individual no one knows Ö He affects the economy through his influence on monetary policy but he is not elected and does not have to answer to anyone.


Topic: Is the level of independence given to the Fed truly a good thing or

should the Fed be regulated by someone Ė Congress, the President or etc?


The current state of the US economy will affect your thinking about this question whether you realize it or not. Keep in mind, though, that the economy and the labor market weren't and won't always be bad. As you formulate your opinion on this question, take a long-range view of the economy ... sometimes it will be bad and sometimes it will be good. Don't base your opinion on any particular state of the economy.

There is no right or wrong answer to the question posed by your topic and I'm not as interested in your answer as I am in your rationale. For example, go back to an example I used earlier. You start out in favor of the death penalty because you believe it has a deterrent effect but all of the research shows there is no deterrent effect. If you end your essay still in favor of the death penalty, that's okay. If you end your essay still in favor of the death penalty because it has a deterrent effect, that's not okay since your rationale is not consistent with factual information.

  1. Look at the information and research about your topic in the margin notes and power point presentations from your course and in the links below. Use the information from these sources to write your essay. However, do NOT use any direct quotes, citations or references from these sources. The essay is too short for direct quotes ... use your own words. As for references, I've given you the sources so I'll know where the information came from. (I've tried to give you a wide range of sources and opinions in the reference list below. Inclusion on the list does not constitute an endorsement of either the sources or the opinions.)

US Monetary Policy: How is the Fed Structured?

Testimony: Kohn, Federal Reserve Independence

Speech, Meyer: The Politics of Monetary Policy

Federal Reserve Independence and Democracy

Fedís Alvarez Defends Federal Reserve

Don't Fight The Fed, Please: Forbes

Central Bank Independence and Disinflationary Credibility (full text is PDF)

SSRN: Central Bank Independence and Transparency (full text is PDF)

The Bank for International Settlements

Central Bank Independence and Monetary Policymaking Institutions

Keeping Politics Out of the Fed

The Fed in a Corner

Federal Reserve Independence

Federal Reserve Independence Under Threat

Why the Federal Reserve Bank Must Maintain Its Independence

Central Bank Independence Under Threat | The Economist

Central Bank Independence Challenged: WSJ

Central Bank Independence and Macroeconomic Performance

Central Bank Independence: Failures, Successes

Central Bank Independence Promotes Budgetary Efficiency (full text is PDF)

Choosing the Federal Reserve Chair: Lessons from History (PDF)

Why is it important to separate Federal Reserve monetary policy decisions from political influence?

Is the Federal Reserve accountable to anyone?

What does it mean that the Federal Reserve is "independent within the government"?

download free Adobe PDF reader

Online Databases: Some of the links above may take you to an article's abstract rather than the complete article. If you want to see the entire article but the site requires registration and/or payment, try your college library's online database. Almost all articles can be accessed through a database ... that's why colleges purchase databases for student use. Call your college librarian and ask for your username and password and for directions.

I do not expect you to use additional sources of information on your topic. If you do, you MUST cite and reference any additional sources using one of the following formats.

APA (American Psychological Association): regularly used by most social scientists

APSA (American Political Science Association): used (in conjunction with APA) by political science publications

MLA (Modern Language Association): not generally used by social scientists but if you are a humanities major you may be more familiar with this format

CMS (Chicago Manual of Style)

Turabian: a variation of the CMS

You can find style sheets and/or links for each of these styles on the Writing page, the link for which is at the top of the main Online Courses page.

  1. You may use any font and line spacing you wish when formatting your essay but the content of your essay must be a minimum of 750 words. You must also adequately cover your topic, though, and you may find it difficult to completely cover your topic in 750 words unless you are extremely concise. If you feel you need more length to cover your topic, you are welcome to write a longer essay. However, you are only required to write an essay the content of which is 750 (not 749) words in length. If the content (that does not include your name, type of assignment, citations, etc ... only the content of the paper itself) is not at least 750 words in length I will return your paper to you unread.

Your critical thinking essay should follow a specific outline. Before you begin the writing phase of your essay, read What Makes A Paper Good? and Critical Thinking Essay Format. The outline given in the second link is the one you need to follow in your essay. Too, take your time proofing your essay for spelling and grammar mistakes. If spelling and grammar are not among your talents, ask a friend who is good with spelling and grammar to proof your essay. ďAĒ papers do not have spelling and grammar mistakes!

Under the Optional Links section at the top of this page, I have posted a link to my grading rubric for the critical thinking essay.


Essay Submission Instructions

By the deadline shown in the Course Schedule on the main page of your syllabus:
  • Send your Critical Thinking Essay in the body of a new email to

  • Put only your name and Essay at the beginning of your email.

  • Use the correct subject line.

  • Late essays will lose one point per day late, including weekends and holidays.



Copyright © 1996 Amy S Glenn
Last updated:   04/01/2020   0130

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