...U. S. Federal Reserve's Monetary Policy Eco 561 June 22, 2010 Douglas C. Holbrook U. S. Federal Reserve's Monetary Policy The Fed can be considered second to the President of the United States as one of the most influential and powerful men in the United States. As the world tunes in to the and monetary decisions that the Federal Reserve makes, those deacons impacts trillions of dollars and hundred of millions of people. It is important to understand the function of money, the structure of the Fed Reserve and purpose, how the central bank controls the money supply and lastly what current monetary policy has the Fed enacted to boost up the economy. The Purpose and Function of Money Money is an economic resource. It is a mean to obtain value to be utilized for different purposes in ways other than the manner earned or realized. Money and its function simplify the production and use of wealth. It is defined as anything that is “widely accepted as a medium of exchange” (McConnell, Brue, & Flynn, 2009). Some of its functions are as follows: * Unit of account – monetary units are used as yardsticks to measure the comparative value of an array of goods and services, and resources. * Store of value/wealth – enables people to purchase goods and services in the present or future. * Medium of exchange – it is usable for buying and selling of goods and services. Money allows society to escape the complication of barter. As for the medium of exchange or...
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...Federal Reserve Paper Federal Reserve Paper Eco/212 Professor Sharma Kareisha Hawkins October 7, 2010 In this paper I will define the purpose and function of money. I will explain how the Federal Reserve’s manages the monetary system of the United States of America. In this paper I will also talk about the stated direction of recent monetary monetary policy in our nation. I will also explain what the effects of monetary policy are on production and employment in the economy. In defining the purpose of money, one must simply define money’s function. Money has many purposes but one purpose of money is that it has a standard exchange. It has a unit of account and a store value. “A medium of exchange is an item that buyers give to sellers when they produce goods and services. (Mankiw 2007) An example of this is if a person goes to Mr.T’s bar-b-que, that person pays Mr.T for the bar-b-que they just ate. Money as a unit of account is a measurement used to understand the value of a good or service or debt. For example if a candy bar costs $1 and a TV costs $300, then the TV might be worth 300 candy bars, but it is measured in money. Money as “a store of value is an item that people can use to transfer purchasing power from the present to the future.” (Mankiw) Federal Reserve is the central bank of the United States of America. The Federal Reserve Bank was created in 1913 to supervise our nation’s bank and to control the money supply of the...
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...The Federal Reserve System of the U.S. Origin The central banking system of the U.S., the Federal Reserve, was established on December 23, 1913 by the Federal Reserve Act of 1913. Prior to that date, the only official representative of the U.S. Treasury were the First Bank (1791-1811) and Second Bank (1816-1836). They were the sole source to issue and back official U.S. money. All other banks were either state or private organized with their own banknotes. As longs as money was deposited and withdrawn from the same financial institution there was no financial loss. But if depositors withdraw their money from a different bank, they never knew exactly what they would receive. As the U.S. grew in both people and economic and people were able to move more freely, a need for a more standardized banking system become necessary. In 1863, The National Bank Act was passed by Congress. Its purpose was to provide a supervised system of National Banks. These banks were to standardize banking operations, establish minimum capital to be held by banks and how loans were to be administered. They also mandated a 10% tax on banknotes owned by other banks. This eventually eliminated all other banknotes. After a severe financial panic in 1907 concerning Wall Street, many Americans felt that their banking structure was out of date and needed reform. In 1912, hearings were held to examine the U.S. banking system. The committee concluded that the U.S banking and financial system had...
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...Running head: FEDERAL RESERVE PAPER The Federal Reserve is an institution that makes many decisions that affect the American economy. The purpose and function of money will be explained within this paper. This paper will explain how the central bank manages the nation’s monetary system and outline the stated direction of recent monetary policy. The latest action by the Federal Reserve to confirm this direction will be explained. This paper will explain the effects of monetary policies on the economy’s production and employment. Purpose and Function of Money The purpose or function of money is to make an artificial value as a medium used to receive compensation for a service or good. Money makes trade easier between people, businesses and countries. If there was no money, than how would wages be paid to people who produce goods? And how would goods or services be paid for by these people to support them? Typically the value of money can be set by government forces, gold, or market conditions. Management of a Nation’s Monetary System The central bank manages the nation's monetary system by either increasing or decreasing the monetary supply which can increase or slow down inflation, affect interest rates and control the rate in which goods and services increase in relation to one another. The central bank’s main job is to make sure the national currency and monetary supply remain stable. “The Federal Reserve is considered an independent central...
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...has a devoted but detests banking system. The most rundown association is the nation’s central bank, the Federal Reserve. Purpose and Function of Money The purpose of function of money to devise an artificial value as medium used to evaluate a service or goods. Money performs as a stock up of value when someone obtains it either today or tomorrow, that person is still able to use it later. Money operates as a set of values when someone is using it to assess how much a good or service is worth. Central Bank The central bank administers the nation's monetary system by either increasing or decreasing the monetary supply, which can increase or decrease inflation, affect interest rates, and control the rate in which increase goods and services. The Federal Reserve can modify the interest rate on money it offers to banks. A higher interest rate composes money to be more expensive, and this discourages banks to lend out money. Dropping interest rates could have the opposite outcome. The Federal Reserve has the power to adjust the reserve requirements. If the Federal Reserve is inferior, the banks could boost their leverage and lend out more money. Recent Monetary Policy in the United States The recent report of the Monetary Policy Report to the Congress was on July 21, 2010. In the statement, it states that the Federal Reserve set aside their goals for the federal funds rate at an array between zero and ¼ percent. The Federal Reserve had procured an accumulation of an...
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...The Federal Reserve University of Phoenix The Federal Reserve The Federal Reserve System is the central bank of the United States. The purpose of the Fed is to control the United States economy by implementing policies to regulate interest rates and the money supply. To understand better how the Fed system works, we have to understand the purpose of money and its function, and explained how the central bank manages the monetary system. Summarize the stated direction of recent monetary policy to realize why the fed makes such decisions as well as list at least one policy that the Fed took to confirm that direction, and as a final point explain the impact of monetary policies on economic production and employment. “Money is the set of assets in the economy that people use to buy goods and services from other people” (Mankiw,). Money includes currency, paper bills, coins, and any of those accepted by sellers in exchange of goods or services. Money has three main functions. The first function is as medium of exchange, buyer use money in exchange for goods or services. Second, money as a unit of account, people use it to post prices and record debts. Finally, money as a store of value, people can use money to transfer purchasing power from the present to the future. Money is administered by the government through the Federal Reserve who acts as the central bank of the nation’s monetary system. The central bank is an institution designed to supervise the banking system, and...
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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...
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...Federal Reserve Paper ECO/212 This paper is for reference material only Federal Reserve Paper Founded by Congress in 1913 to provide America with a safer, flexible, and stable monetary system, the Federal Reserve System’s role is to conduct monetary policy, supervise and regulate banking institutions, maintain the stability of the financial system, and provide financial services (Board of Governors of the Federal Reserve System, 2009). From the economic decline in 2007, the Federal Reserve Board has enacted economic policies getting the nation back on track. This essay will explore using the website, to define the purpose and function of money, explain how the central bank manages the nation’s monetary system, outline the stated direction of recent monetary policy, list one policy action in place to confirm that direction, and explain the effects of monetary policies on the economies’ production and employment The purpose and function of money is to provide a common scale for valuing goods and services and is an official currency issued by a government. Before the invention of money, parties bartered for goods, although disagreements over perishable items like milk, in exchange for lumber created unequal values. Unlike certain goods, money does not age, die, grow stale, or expire. Money also provides a means to perform a transaction if only one party member wants what the other is offering for sale. Money can be saved, or borrowed for large purchases such as homes...
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...Federal Reserve Report Federal Reserve Report Background The central bank in the United States is called the Federal Reserve System. The Federal Reserve System serves several purposes. Some of the purposes that the Federal Reserve serves include controlling monetary policy, overseeing financial institutions, banking for the government, distributing money, loaning money as last resort, and provide banking for commercial banks. The Federal Reserve is made up of 13 banks. The first 12 banks have their own region. The 13th bank is the headquarters located in the capital, Washington D.C. The Federal Reserve is independent of the government it is not part of the Department of Treasury. In some countries, like England, the central bank is part of the government (Colander, 2010, p.341). The Federal Reserve has a leadership group called the Federal Open Market Committee or FOMC. The major function of the FOMC is to select monetary policies. The FOMC is made up of a group of governors that are appointed by the president. The Discount Rate The discount rate is an interest rate. When commercial banks borrow money from the Federal Reserve it is just like when a normal citizen borrows money from a bank, the loan is paid bank with interest. The discount rate is “the rate of interest the Fed charges for loans it makes to banks” (Colander, 2010, p.348). The discount rate is controlled by the how commercial banks borrow. The Federal Reserve is a last result bank, this means they only want...
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...Federal Reserve’s Revised Monetary Policy The Federal Reserve is not part of the government it is the United States central and most powerful bank; the systems at which they operate control the money and finances revolving the United States. Their goal in the economy is stability by influencing the monetary policy, providing financial services, and regulating banks, and costumers to protect the financial markets and system. The purpose of money is a means of exchange for goods or services; money is used to measure the value of goods or services and exchanged as payment. Banks create money by investing the money by their customers. Banks will use this money to invest in the market. Banks also use the depositor’s money to make loans. The interest paid on those loans is more than the paid interest to the depositors; therefore the banks are creating money. Essentially the Federal Reserve is a privately owned bank and corporation. The Federal Reserve System is made up of seven board governors elected by the President of the United States. These governors define and implement polices to control money in the economy. They control money with interest rates, which in turn manipulate the credit of the economy. Technically the Federal Reserve can increase or decrease inflation because they control the rate at which money is available and worth. The monetary policy is the main governing policy conducted independently in the United States; the Federal Reserve runs...
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...Week 4 macro PowerPoint notepad The Federal Reserve System is the central banking authority of the United States It acts as a fiscal agent for the United States government and is custodian of the reserve accounts of commercial banks, makes loans to commercial banks, and is authorized to issue Federal Reserve notes that constitute the entire supply of paper currency of the country. Created by the Federal Reserve Act of 1913, it is comprised of 12 Federal Reserve banks, the Federal Open Market Committee, and the Federal Advisory Council, and since 1976, a Consumer Advisory Council which includes several thousand member banks. The board of Governors of the Federal Reserve System determines the reserve requirements of the member banks within statutory limits, reviews and determines the discount rates established pursuant to the Federal Reserve Act to serve the public interest; it is governed by a board of nine directors, six of whom are elected by the member banks and three of whom are appointed by the Board of Governors of the Federal Reserve System. The Federal. Qualifications. The Federal Reserve System exercises its regulatory powers in several ways, the most important of which may be classified as instruments of direct or indirect control. One form of direct control can be exercised by adjusting the legal reserve ratio (the proportion of its deposits that a member bank must hold in its reserve account), and as a result, increasing or decreasing the amount of new loans that...
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...Federal Reserve Paper Introduction This paper will give definition to the purpose and function of money. It will explain how the Federal Reserve manages the monetary system of the United States. This paper will also outline the stated direction of recent monetary policy in this nation. It will list at least one policy action taken by the Federal Reserve confirming that direction. And, this paper will give explanation to the effects of monetary policies on production and employment within the economy. a. Define the purpose and function of money. In defining the purpose of money, one must simply define its functions. There are three functions of money. First of all, money is a medium of exchange. It is also a unit of account, and a store of value. “A medium of exchange is an item that buyers give to sellers when they purchase goods and services.” (Mankiw, 2007, p. 643) For example, when a person goes to Joe’s Diner for a hamburger and shake, he pays Joe with money for the meal he just ate. Money as a unit of account is a measurement used to understand the value of a good or service or a debt. For instance, if a Pepsi costs $1 and a television costs $200, the TV may be worth 200 Pepsis, but it is measured in dollars. Money as “a store of value is an item that people can use to transfer purchasing power from the present to the future.” (Mankiw, p. 643) When a person buys gasoline today, the store owner can hold that money to purchase a new putter next week. ...
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...as the Federal Reserve System. This is known as the central banking system of the United States of America. The Federal Reserve was first established on December 23, 1913. It was enacted by the Federal Reserve Act. This is an act to provide for the establishment of Federal Reserve banks. Mostly it was to furnish an elastic currency, to afford means of rediscounting commercial paper, to establish a more effective supervision of banking in the United States of America, and also for other purposes. Over the years different responsibilities and roles have occurred within the Federal Reserve. It did not just consist of the same functions but over time it changed and changed for the good of the country. The major factor that has contributed to most of the change within the Federal Reserve is the Great Depression. The Great Depression was known as a severe worldwide economic depression. There was a high unemployment rate, poverty, deflation, plunging from incomes, and many more consequences. These components sent the United States into a deep state of unstableness. The Federal Reserve System is made up of several different components. These components consist of appointed Board of Governors, the Federal Open Market Committee, and twelve regional Federal Reserve Banks, which are located in major cities throughout the nation, numerous privately owned U.S. member banks and various advisory councils. There are seven members that make up the Board of Governors in the Federal Reserve System...
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...U.S Federal Reserve Monetary Policy Sherwin Harris ECO/212 May 30, 2011 Frank Vigil Introduction The Monetary Policy relates to the activities that the Federal Reserve take on to effect the sum of money and credit in the U.S. economy. Changes to the amount of money and credit have emotional impacts on the interests rates and the performance of the U.S. economy, if the cost of credit is reduced, more people and business will borrow money and the economy will accelerate. Money The purpose and function of money can be considered a medium of exchange. Is a standard representation of value, and can be used as a payment for products, service of goods or as a measure of wealth. The assessment of money are regulated by government agencies, gold, and most market conditions, The central bank manages the nation's monetary system by increasing or decreasing the monetary supply which in good common spirit can enhance increase or downcast the affect of interest rates, and control the rate in which goods and services increase in appraisal in relation to one another. Money is not just resources of exchange; it is also a store of value for an individual, family or a society. In its modest form, money could be, and was at times, coin or pieces of paper that represented real things. Gold has been used as the backing for many currencies in most countries, the of meaning money that has no commodities or other valuables directly backing it, is often said...
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...Federal Reserve Bank Lovey Brown ECO/372 August 9, 2012 The United States, was economically influenced by both domestic and global events in 2011. The Japanese earthquake left a major fiscal effect on the world. Monetary situations of importance is the reason states have central banks. These banks act as the state's money directors. Purpose and Function of Money Money has a main purpose and function in the economic world. It functions as a regulation of well-known dealings for government systems. Monetary units can be calculated by the quality of the other forms of currency such as commodities. The economic value of each unit of measurement is normally discovered by the government of which it is settled. In the United States, the Federal Reserve controls the domestic monetary system policy. There are primarily two ways a central bank controls its state's monetary system policy. The Federal Reserve can allocate interest rates to banks acquiring money from the Central Bank. The Federal Reserve can also regulate and set the Federal Reserve obligation for banking organizations. Managing a Nation's Monetary System Without an organization that controls states’ money, there would not only be a diverse nation, and possibly open to improper growth. Our nation faced prevailing economic depressions in the 1800s because of the want of a domestic monetary control system. In 1913, Congress decided that it was necessary to proportion the fiscal...
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