Question

What is the federal reserve? What are the functions of the federal reserve? Please discuss in detail.

Answer 1

The Federal Reserve System is America's central bank.1 That makes it the most powerful single actor in the U.S. economy and thus the world. It is so complicated that some consider it a "secret society" that controls the world's money. The functions of the federal reserve are -

• Conducting national monetary policy by influencing monetary and credit conditions in the U.S. economy to ensure maximum employment, stable prices, and moderate long-term interest rates.Expansionary policy makes the economy grow faster and create jobs. If the economy grows too much, though, it triggers inflation. When that happens, the Federal Reserve raises interest rates as part of contractionary monetary policy. High interest rates make borrowing expensive. Increased loan costs slow growth and lower the likelihood of businesses raising prices
• Supervising and regulating banking institutions to ensure the safety of the U.S. banking and financial system and to protect consumers’ credit rights.n fact, the Fed was given the mandate to supervise "systematically important institutions," and in 2015, it created the Large Institution Supervision Coordinating Committee.This committee regulates the 16 largest banks, and most importantly, is responsible for the annual stress test of 31 banks.
• Maintaining financial system stability and containing systemic risk.The Federal Reserve worked closely with the Treasury Department to prevent global financial collapse during the financial crisis of 2008. I
• Providing financial services, including a pivotal role in operating the national payments system, to depository institutions, the U.S. government, and foreign official institutions.The Fed is called the "bankers' bank." That is because each Reserve bank stores currency, processes checks, and makes loans for its members to meet their reserve requirements when needed.