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In: Economics

The Federal Reserve System (the Fed) is the nation’s central bank; what does it do?

The Federal Reserve System (the Fed) is the nation’s central bank; what does it do?

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Expert Solution

The Federal Reserve is the central bank of the USA.

It created in 1913, with the objective to provide safety, flexibility and stability to the monetary system of USA.

Its main functions are:

- It is responsible for the monetary policy in USA. It uses money and credit tools, and attempts to bring inflation and employment levels to their targets.

- It monitors and regulates the banking and non-banking institutions to bring stability in the financial system. It ensures that the system is sound, so that consumers are protected.

- It maintains stability in the financial system, so that small events don't create bigger risks.

- It also serves the US government, as well as US and foreign official institutions. It operates and monitors the payments systems in the USA.

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The survival, stability and development of the monetary and financial system in USA depends on the Fed. Apart from keeping the system efficient and risk-free, it also protects the interests of the community at large. It is therefore one of the most important institutions in the USA.

Rahul Sunny answered 2 years ago
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