What does Representative Kemp’s comment imply about the power of the chairman of the Federal Reserve? Do you think he may have been exaggerating? Explain.


1. Contrast the liquidity premium theory to the market segmentation theory of the term structure of interest rates.

2. Former Congressman Jack Kemp reportedly once said that he wanted to become the most powerful man in Washington, D.C. the chairman of the Board of Governors of the Federal Reserve System. What does Representative Kemp’s comment imply about the power of the chairman of the Federal Reserve? Do you think he may have been exaggerating? Explain.