Question

Should the Federal Reserve System control the nation's money supply? Defend your position using economic principles.

minimum 250 with sources

Answer 1

First, what is the Federal Reserve? The Federal Reserve System is America’s central bank. Which makes the Fed the single most powerful actor in the U.S. economy. There are four functions of the Federal Reserve, first, the Fed conducts monetary policy, second, the Fed supervises and regulates banks to protect customers, third it maintains the stability of the financial market, and fourth it provides services to other banks, U.S. government and foreign banks. (Amadeo, 2016) The Federal Reserve controls inflation by managing credit, which is the largest component of the money supply that is in question. What they do is restrict credit by raising interest rates and make credit more expensive to reduce the money supply. This all in the end slows inflation. On the other side when there is no inflation the Federal Reserve will make credit cheaper to obtain by lowering the interest rate. They use expansionary monetary policy when it lowers the interest rates. This helps the economy grow and create more jobs. (Amadeo, 2016) So to answer the question should the Fed control the nation’s money supply? The fed currently controls most if not all of our nation’s money supply. The Fed can directly affect our stocks and bonds, mutual funds, and loan rates. The Fed and also indirectly affect your home’s value and even the changes of getting laid off or rehired (Amadeo, 2016). With that said what do we would we replace the Federal Reserve System with? I say should stay in control. It would cause more issues to our economy if we tried to change it. Perhaps With the federal reserve system in place, it does what is needed to assist the economy in staying level and adjust as needed. So, the Federal Reserve System should control the nation’s money supply.