Question

Discuss how the Federal reserve Bank influences economic activity, touch on interest rates

Answer 1

The Federal Reserve commonly referred to as the “Fed” is part of the U.S. Federal Government, which means it can settle on choices without endorsement from the President or Congress and it ought to be "free" of gathering legislative issues. It achieves its objective with four essential obligations: direct money related approach, manage banks, keep up solidness of the monetary framework and give budgetary administrations to the saving money framework.

Keeping our economy healthy is one of the most important jobs of the Federal Reserve. The Federal Reserve System has been given a dual mandate—pursuing the economic goals of price stability and maximum employment. The Fed controls or regulates interest rates, in this way, for instance, on the off chance that you need to purchase a security, it impacts what rate you will get paid and the cost of the security or on the off chance that you need to purchase a house, it impacts the home loan rate.

At the point when a bank obtains cash from the Fed to loan to people, if the financing cost that bank needs to pay is lower, at that point it is less expensive for banks to loan and they will charge a lower rate. Like their control of regulation of interest rates, changing the level of money holds encourages people get to advances to purchase autos or homes or head off to college and the organizations they purchase from advantage with higher deals income which ought to convert into an expanded readiness and capacity to procure more individuals. The federal funds rate is essential since developments in the rate impact other loan costs in the economy. For instance, if the government reserves rate rises, the prime rate, home credit rates, and auto advance rates will probably ascend also.