Question

Please give an in depth explanation of the U.S. financial system and the country's management of foreign exchange.

Answer 1

The US financial system is made up of many types of financial institutions such as bond market,the stock market,banks and mutual funds.All these institutions acts to direct the resources of households that wants to save some of their income into the hands of households and firms who wants to borrow.There are also pension funds ,credit unions,insurance companies,and even the local loan shark.

Financial institution are grouped into financial markets and Financial intermediaries. Financial markets are those institutions through which a person who wants to save can directly supply funds to a person who wants to borrow.a) The bond market is a market where bonds are traded.Bond is a certificate of indebtedness that specifies the obligations of the borrower to the holder of the bond and have fixed rate of interest and maturity time.b) Stock market is a love where buying and selling of shares take place.Here stock represents the ownership in a firm and is therefore a claim to the profits that the firm makes.The financial intermidiaries include Banks and there primary job of banks is to take in deposits from people who save and use this deposits to make loan to people who wants to borrow.the other financial intermediary of increasing importance in the US economy is mutual fund .A mutual fund is an institution that sells shares to public and uses the proceeds to buy a portfolio of stocks and bonds.The advantage is that people with small amounts of money can diversify their holdings.The regulators of the financial institutions are SEC,FED RESERVE,FATF,FDIC.The forex market is a network of financial institutions and brokers in. Which individuals,businesses,banks and government buy and sell currencies of diff.countries.Exchange rate is the price of one currency in terms of other currency.The management of exchange rate is very essential as countries investment and financial markets depends on them. In US congress has assigned the US treasury primary responsibility implementing financial policies which are made in consulting with federal reserve The monetary authority intervention is done by Federal. Reserve bank of NY,which publish the full activity of US monetary authorities app 30 days after the end of every calander quarter