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Federal Reserve Paper

Federal Reserve Paper

The function and purpose of money is very simple; Money is meant to assist trade making life better. The purpose of money, whether it is credit cards, demand deposits or currency, it’s a means of exchange to buy services and goods. It is a known fact that all humans’ beings will accept it and also a tool taken in exchange for something else. Money has three functions in the economy. They are, the store of value which is has value and is transferred from one person to the next when purchasing services or goods, the unit of account which measures the debts and prices, and a medium of exchange which is a universal tool that allows sellers and buyers to trade money in exchange for services and goods. The central bank manages a nations monetary system thru a system we call the Federal Reserve or Fed. The Federal Reserve exercises considerable control over the demand for and supply of balances that depository institutions hold at the Reserve Banks. They manage our nation’s supply of credit and money and operate at the center of the nation’s financial system. They also keeps the wheels of business rolling with coin, currency and payments services, such as check-clearing and electronic funds transfer. The Federal Reserve sells and buys United States government bonds in open-market operations to control the supply and demand of money and make it move toward equilibrium. To decrease the supply of money the Fed sells government bonds that the public pays and oppositely, to increase the supply of money, the Fed buys bonds from the public. The Fed also sets reserve requirements that banks must hold against their deposits. If the reserve requirements are substantial the bank must hold more money that means they can lend out less money. When the reserves are set lower, they can lend more money. An "easy" monetary

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