Question

what are the multi-step process involving the methods the Federal Reserve Bank will undertake to create the $1,200 stimulus checks? Take us through all of the steps of the process, from the Congress approving a federal expenditure with no tax increase, until the public’s possession of the newly printed money.  Include all of the steps that must be undertaken by both the Federal Reserve Bank and by the US Treasury for this money supply expansion to go from start to finish.  Do not skip any necessary steps in the process; keep explaining all government steps until you have the new money.

Answer 1

The central bank of America is known as Federal Reserve System (THE FED). It has 3 components:

a)Board of Governors

Its 7 members are responsible for setting discount rate and reserve requirement rate.

b)Federal reserve banks

There is a FED bank located in each 12 districts.

c)Federal open market committee(FOMC)

The Fed performs its functions by monetary policies.

It also creates money by suggesting and advicing Congress on various policies to be adopted to increase money supply.

Following are different methods adopted by Fed to create $1200 :

1)Lowers interest rate

Fed reduces interest rate to be charged on loan.This will encourage public to take more loan.This will grow business in the economy.

2​​​​​​​​​​​​​​​​​​​​​​​​)Reduces Reserve Requirement

Fed reduces reserve requirement % of nation's banks.This will increase availability of fund with them to ve given as loan.Thus,money supply increases.

3)Fed carries on open market operations.It buys securities from banks on the behalf of govt and credit money in their account.This will increase amt of money available to be given as loan.

4)After getting instructions from congress,Fed prints more currency against securities given by congress

Whatever the method Fed adopts,there is always a process which includes Fed,Congress,nation's banks and general public.