Question

Please answer the following?
a.    What are the functions Fed?

b.     What are the duties of the Board of Governors of Fed?

c.    What is the difference between Fed and ECB?

d.     What is FOMC and state its functions.

Answer 1

a. The functions of Fed are:

1. To supervise and regulate the banking operations, so that commercial banks acts in accordance to the guidlines of Federal Reserve.
2. To maintain an effective payment system.
3. To control the monetary policies of the country which influnce the supply of money into the market and helps in the growth and sustainability of the economy.

b. The duties of the Board of Governers of the Fed are:

• To analyse the economic development of domestic as well as of other nations which helps in framing out effective policies.
• To regulate the operations of Fed and provide guidance for effective working and smooth operations of Federal Reserve banks.
• To provide guidance on effective payment system.
• To work towards consumer credit protection.

c. The main difference between Federal Reserve (Fed) and European Central Bank (ECB) is that Fed buys US treasury bonds in the event of financial crisis, whereas ECB lends money to government of European member states in the event of financial crisis.Treasuries bought by Fed are usually repurchased at the end of maturity period, whereas ECB lend for the short term duration which are secured by collateral.

d. FOMC stands for Federal Open Market Committee and it provides guidance on effective monetary policies, providing specific direction to open market operations.