President Trump tweeted on Friday that Jerome H. Powell chair of the Federal Reserve might
be a bigger enemy of the United States than China's president because the Fed has refused
Trump's demand to lower interest rates significantly. The president said that the high cost of
borrowing hurts the US. economy.. but today unemployment is near an all-time low and
inflation is below the Fed's 2 percent target. Trump's trade war - particularly his on again
off-again tariffs - has dented business confidence and could push the economy into a
recession. To forestall that, he wants the Fed to lower rates. The Senate confirmed Powell to a
four-year term as chair in addition to a 14-year term as govemor. The law says that governors
can only be fired for cause, and courts don't typically construe policy differences as cause
Institutionally, the Fed is insulated from the rest of the government. Its funds come not from
Congress but from its own operations; Fed govemors have extraordinary long terms and so
forth
Source: "Why is Trump attacking the Federal Reserve? We answer your
questions And what will the Fed do next? The Washington Post August 27
2019
After reading the scenario respond to A, B, and C below.
(A) Describe the informal power of the president that Trump is exercising in the
scenario.
(B) Explain how the Fed's refusal to lower interest rates may affect the President's
popularity
(C) Explain why the Fed would refuse to lower interest rates at the time of this
scenario