Macroeconomics

‭Established‬ ‭in‬ ‭1913,‬ ‭the‬ ‭Fed‬ ‭plays‬ ‭a‬ ‭pivotal‬ ‭role‬ ‭in‬ ‭shaping‬ ‭the‬ ‭country's‬‭monetary‬‭policy,‬‭regulating‬ ‭fnancial‬ ‭institutions,‬ ‭and‬ ‭maintaining‬ ‭the‬ ‭stability‬ ‭of‬ ‭the‬ ‭U.S.‬ ‭fnancial‬ ‭system.‬ ‭It‬ ‭is‬ ‭an‬ ‭independent‬ ‭entity‬ ‭within‬ ‭the‬ ‭U.S.‬ ‭government,‬ ‭designed‬ ‭to‬ ‭operate‬ ‭without‬ ‭political‬ ‭interference‬ ‭to‬‭ensure‬‭sound‬ ‭economic policies and fnancial stability.‬ ‭The Functions of the Central Bank (the Fed)‬ ‭Control‬‭the‬‭Monetary‬‭Policy:‬ ‭The‬‭Fed’s‬‭primary‬‭function‬‭is‬‭to‬ ‭control‬‭monetary‬‭policy‬ ‭.‬‭This‬‭means‬‭the‬ ‭Fed‬ ‭manages‬ ‭the‬ ‭money‬ ‭supply‬ ‭and‬ ‭interest‬ ‭rates‬ ‭to‬ ‭influence‬ ‭economic‬ ‭conditions.‬ ‭This‬ ‭function‬ ‭involves‬ ‭issuing‬ ‭notes‬ ‭and‬‭paper‬‭currency,‬‭and‬‭controlling‬‭the‬‭circulation‬‭of‬‭money,‬‭interest‬‭rates,‬‭and‬ ‭reserve requirements (balances that commercial banks must hold at all times).‬ ‭Act‬‭as‬‭a‬‭Fiscal‬‭Agent‬‭to‬‭the‬‭Government:‬ ‭The‬‭Fed‬‭works‬‭for‬‭the‬‭well-being‬‭of‬‭the‬‭economy‬‭as‬‭a‬‭whole,‬ ‭instead‬‭of‬‭catering‬‭directly‬‭to‬‭individuals‬‭and‬‭businesses.‬‭It‬‭helps‬‭the‬‭government‬‭with‬‭collecting‬‭taxes,‬ ‭managing its spending, and redeeming bonds.‬ ‭Act‬ ‭as‬ ‭the‬ ‭“Bankers’‬ ‭Bank”:‬ ‭The‬ ‭Fed‬‭holds‬‭deposits‬‭from‬‭commercial‬‭banks‬‭and‬‭provides‬‭them‬‭with‬ ‭loans.‬‭It‬‭is‬‭responsible‬‭for‬‭regulating‬‭their‬‭lending‬‭activities,‬‭which‬‭is‬‭why‬‭it‬‭is‬‭sometimes‬‭referred‬‭to‬‭as‬ ‭'the bankers' bank.‬ ‭Supervise‬‭Operations‬‭of‬‭Commercial‬‭Banks‬‭and‬‭Other‬‭Financial‬‭Institutions:‬ ‭The‬‭Fed‬‭examines‬‭the‬ ‭proftability‬ ‭of‬ ‭fnancial‬ ‭institutions,‬‭such‬‭as‬‭commercial‬‭banks,‬‭and‬‭ensures‬‭that‬‭they‬‭comply‬‭with‬‭the‬ ‭established regulations.‬ ‭Act‬ ‭as‬ ‭the‬ ‭Lender‬ ‭of‬ ‭Last‬ ‭Resort:‬ ‭When‬ ‭the‬ ‭banking‬ ‭sector‬ ‭faces‬ ‭economic‬ ‭emergencies,‬ ‭such‬ ‭as‬ ‭bankruptcy,‬ ‭the‬ ‭Fed‬ ‭may‬ ‭intervene‬ ‭by‬ ‭lending‬ ‭money‬ ‭to‬ ‭help‬ ‭certain‬ ‭fnancial‬ ‭institutions‬ ‭meet‬ ‭their‬ ‭obligations. This is done to ensure a healthy economy.‬ ‭The Structure of the Fed‬

‭The Fed is structured into a decentralized system with various components:‬

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