Increased skepticism about the role of the Federal Reserve as well as the spread of misinformation (e. g., that increasing the money supply devalues the dollar and amounts to counterfeiting) have led some politicians to propose that the Federal Reserve be abolished. If this happens, monetary policy would essentially cease to exist as the money supply would no longer be flexible. This was the case about 50 years ago when the money supply was still tied to the amount of gold in reserves. Given your knowledge of the role of the Federal Reserve (the Fed), identify potential risks to the economy if the Fed is abolished.
Choose each statement that represents a potential risk to the economy if the Fed is abolished.
a. There would be a lack of management of cash in circulation.
b. During a panic, banks could be forced into insolvency.
c. Fluctuations in the business cycle could increase in frequency and severity.
d. There would be an inability to increase or decrease government spending.