Part 1The European Central Bank (ECB) has complete control over monetary policy in eleven euro countries and has a charter that cannot be changed by legislation. In comparison to the Federal Reserve System LOADING... , the ECB is: Part 2
A. less independent. B. equally independent. C. more independent.

Question

Part 1The European Central Bank​ (ECB) has complete control over monetary policy in eleven euro countries and has a charter that cannot be changed by legislation. In comparison to the Federal Reserve System LOADING... ​, the ECB​ is: Part 2
A. less independent. B. equally independent. C. more independent.

BlackTom AI · Accepted Answer

The question asks us to compare the independence of the European Central Bank (ECB) with the Federal Reserve System in the context of the claim that the ECB has complete control over monetary policy and a charter difficult to change by legislation.
Option A: 'A. less independent.' This option would imply that the ECB has more political vulnerability or more legislative influence over its decisions than the Fed. In reality, the ECB’s monetary policy is designed to operate with a high degree of independence; its mandate (price stability) and its governing rules are enshrined in treaties, and decision-making is insulated from short-term political pressures. Therefore, labeling the ECB as less independent misstates its degree of autonomy relative to typical central banking arrangements.
Option B: 'B. equally independent.' If one argues equal independence, one would have to show that both institutions are equally insulated from political interference and share analogous legal protections and mandates. However, the Fed, while independent, operates in a political environment with the U.S. political system and has a dual mandate, plus some mechanisms of congressional oversight and potential influence through legislation and appointments that can affect policy weighting. In contrast, the ECB’s independence is buffered by treaty provisions and a broader framework intended to prevent political capture, making it generally considered not just independent but more insulated in practice. Thus this option understates the difference in their institutional design.
Option C: 'C. more independent.' This choice aligns with standard assessments: the ECB’s monetary policy is governed by treaties that protect its mandate and minimize political interference, and it operates with decision-making bodies (the Executive Board and the Governing Council) that are designed to resist direct political manipulation. The ECB’s charter constraints and the centralized monetary policy for multiple sovereign states contribute to a higher degree of independence compared with the Fed. This reasoning supports choosing option C as the correct assessment.
In summary, option A overclaims less independence, option B asserts equal independence without acknowledging the nuanced differences in governance and mandate, while option C correctly identifies the ECB as more independent due to its treaty-based protections and insulation from legislative influence. The contrast with the Fed’s structure—where political considerations and a dual mandate play a more prominent role—further clarifies why the ECB is characterized as more independent.

Homework:Chapter 16 Homework

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