The Federal Reserve

The feederal defy and how it controls specie in the sparing.

The federal Reserve System, also known as The Fed, is the central bank of the unite States. In its role as a central bank, the Fed is a bank for other banks and a bank for the federal government. It was created to provide the nation with a safer, more flexible, and more stalls monetary and financial system. Over the years, its role in banking and the providence has expanded. The Federal Reserve System is a network of cardinal Federal Reserve Banks and a number of branches under the world-wide oversight of the Board of Governors. The Reserve Banks atomic number 18 the operating gird of the central bank. (Federal Reserve kids, 2010)

Now that I have explained what the Federal Reserve System is I will discuss how the Feds reply when in that location is too much money or a shortage of money in the economy. Although, the Feds most important responsibleness is to ensure that there is enough money and credit in circulation to stimulate growth in the economy, a surplus of money in the economy can result in the pooh-pooh of the nurture of our currency. Too much money in the economy results in inflation which means that the prices of goods and services are insurrection but our currency has limited purchasing power.



When there is a shortage of money in the economy the result is deflation, this is a general decline in prices, it is often ca utilise by a reduction in the supply of money or credit. When there is a shortage of money in the economy the value of our currency will rise.
The Feds uses three tools to slow down or increase the growth of the money supply. The monetary policy tools used are the push aside send, reserve requirements and open market operations. The discount rate is the interest rates the Feds charge banks that borrow from the reserves. (McEachern, 2011)
When the Feds are trying to slow down the growth of money they whitethorn increase the discount rate. An increase in the discount rate will discourage the banks from borrowing...If you want to get a abounding essay, order it on our website: Ordercustompaper.com



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