Federal Reserve Paper
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- Category: Politics: Economics
- Date Submitted: 08/06/2010 12:33 PM
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Federal Reserve Paper
The purpose of money is a standard measure of value to be exchanged for goods and services. The main functions of money are: a medium of exchange; a unit of account; a store of value.
The Federal Reserve is the country’s central bank. The Fed’s primary mission is to ensure that enough money and credit are available to sustain economic growth without inflation. If there is an indication that inflation is threatening our purchasing power, the Fed may need to slow the growth of the money supply. It does this by using three tools the discount rate, reserve requirements and, most important, open market operations. Responsibility for open market operations rests with the Federal Open Market Committee (FOMC). The committee, consisting of the seven-member Board of Governors and five of the 12 Reserve Bank presidents, meets eight times a year. The governors and the president of the New York Fed are permanent voting members; the other Reserve Bank presidents fill the four remaining voting-member positions in rotation. All 12 presidents participate fully in FOMC discussions. Reserve Bank boards of directors, research departments and regional business leaders contribute information and insights that are used to formulate monetary policy. The Reserve Bank boards recommend changes in the discount rate to the Board of Governors, and the Board of Governors has jurisdiction over reserve requirements. In this way, both the public and the private sectors contribute to these decisions. (Dallas, 2010)
Recent monetary policies are more of the same in recent statements by the fed. Interest rates will remain unchanged, and they may consider buying more mortgage backed securities to help stimulate the economy. This will be considered as a long shot as the chairman of the Federal Reserve, Ben Bernanke is not too sure it will provide much growth. An example of this is the central bank has already bought $1.5 trillion of mortgages and U.S...
The purpose of money is a standard measure of value to be exchanged for goods and services. The main functions of money are: a medium of exchange; a unit of account; a store of value.
The Federal Reserve is the country’s central bank. The Fed’s primary mission is to ensure that enough money and credit are available to sustain economic growth without inflation. If there is an indication that inflation is threatening our purchasing power, the Fed may need to slow the growth of the money supply. It does this by using three tools the discount rate, reserve requirements and, most important, open market operations. Responsibility for open market operations rests with the Federal Open Market Committee (FOMC). The committee, consisting of the seven-member Board of Governors and five of the 12 Reserve Bank presidents, meets eight times a year. The governors and the president of the New York Fed are permanent voting members; the other Reserve Bank presidents fill the four remaining voting-member positions in rotation. All 12 presidents participate fully in FOMC discussions. Reserve Bank boards of directors, research departments and regional business leaders contribute information and insights that are used to formulate monetary policy. The Reserve Bank boards recommend changes in the discount rate to the Board of Governors, and the Board of Governors has jurisdiction over reserve requirements. In this way, both the public and the private sectors contribute to these decisions. (Dallas, 2010)
Recent monetary policies are more of the same in recent statements by the fed. Interest rates will remain unchanged, and they may consider buying more mortgage backed securities to help stimulate the economy. This will be considered as a long shot as the chairman of the Federal Reserve, Ben Bernanke is not too sure it will provide much growth. An example of this is the central bank has already bought $1.5 trillion of mortgages and U.S...