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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