Us Federal Reserve's Monetary Policy
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US Federal Reserve’s Monetary Policy
US Federal Reserve’s Monetary Policy
On December 23, 1913, two days prior to Christmas, Congress passed the Federal Reserve Act. One hour later President Thomas Woodrow Wilson signed the bill into law (Krautkramer, 2004). With the signing of the bill, the United States established 12 Federal Reserve banks throughout the United States. The Federal Reserve Act created an independent system designed to stabilize and maintain an elastic economy by regulating monetary policies. Aside from the monetary policies, the Federal Reserve has other duties that include the “transfer of funds, handling government deposits … supervising and regulating banks” (Federal Reserve System, 2007/2008, p. 420).
Purpose and Function of Money (words of 175 each)
The term Money “is the set of assets in the economy that people regularly use to buy goods and services from other people” (Mankiw, 2007, p. 642). Money serves three functions in the economy. Money is said to be the medium for exchange of products and services, acts as an account, and a store of value.
Medium
As a medium of exchange, money primarily functions as the means in which business transactions take place daily between people and businesses. When purchasing a product or service the person transfer money from his or her possession to the seller. For example, a person wants to purchase a new suit. The price of the suit is 100 dollars. The buyer will hand the seller of the suit 100 dollars, thus the medium of exchange for the suit is complete.
Unit of Account
As a unit of money functions as the measurement of value, cost of goods, services, and assets. This allows people to observe and interpret the price, cost, or profits for a service or product. A five dollar bill has many possibilities to divide into smaller units of measurement; for example, two 50 dollars bills, 100 one dollar bills, and five 20 dollar bills, still equals 100 dollars. No matter how a person divides...
US Federal Reserve’s Monetary Policy
On December 23, 1913, two days prior to Christmas, Congress passed the Federal Reserve Act. One hour later President Thomas Woodrow Wilson signed the bill into law (Krautkramer, 2004). With the signing of the bill, the United States established 12 Federal Reserve banks throughout the United States. The Federal Reserve Act created an independent system designed to stabilize and maintain an elastic economy by regulating monetary policies. Aside from the monetary policies, the Federal Reserve has other duties that include the “transfer of funds, handling government deposits … supervising and regulating banks” (Federal Reserve System, 2007/2008, p. 420).
Purpose and Function of Money (words of 175 each)
The term Money “is the set of assets in the economy that people regularly use to buy goods and services from other people” (Mankiw, 2007, p. 642). Money serves three functions in the economy. Money is said to be the medium for exchange of products and services, acts as an account, and a store of value.
Medium
As a medium of exchange, money primarily functions as the means in which business transactions take place daily between people and businesses. When purchasing a product or service the person transfer money from his or her possession to the seller. For example, a person wants to purchase a new suit. The price of the suit is 100 dollars. The buyer will hand the seller of the suit 100 dollars, thus the medium of exchange for the suit is complete.
Unit of Account
As a unit of money functions as the measurement of value, cost of goods, services, and assets. This allows people to observe and interpret the price, cost, or profits for a service or product. A five dollar bill has many possibilities to divide into smaller units of measurement; for example, two 50 dollars bills, 100 one dollar bills, and five 20 dollar bills, still equals 100 dollars. No matter how a person divides...