Question

Part 1: The role and functioning of central banks

C) The United States central bank is called the Federal reserve system. What are the three primary distinct entities in this system and what are the primary functions of each? How do their responsibilities and actions overlap?

D) What is a technocrat?

Answer 1

C) First of all we have to understand what is central bank or federal bank of country. Any country must be having a heighest monetary athority to control or regulate whole monetary system. It is basically called Cetral bank or resereve bank in many countries. in US it is called federal bank.

Three primary distinct entities of federal bank are

1. Federal reserve board of geverners: Any system must have a group of people who looks after the whole system in proper way. Therefore a board is formed which may incllude President , in many countries a PRime minister, Finnance misnister, Financial secfretary and so on. The main role of this governing body is to help and maitain the stability of financial system. If there are any crises this governing body plays a very crucial role to see the whole matter, meeting are conducted. policy decisions are taken.monetary policy is also formulated by BOG's

2. twelve federal reserve banks: The main function of these banks is to supervise and regulate all financial institutions of the country. It may be opening of a bank, mergers of banks, their financial health, FDIs in banks , marchant banking system etc. But the most important function of FRB is to regulate the monetary system and money supply through different tools like CAsh reserve ratio. stututory liquidity ratio, interest rate, bank rate, repo rate etc. It is very important because total money supply in the economy affects the aggregate demand of the economy up to large extent. so controlling AD money supply must be properly regulated. and it is done by FRB.

3. Federal open market committe: As we know that AD of a country is highly affected by money supply. Many times it does not match with the current demand for goods and services. In such situation FRB may sell its securitiesw in the open market and regulate money supply . This committe watches all the monetary activities very closly and act accordingly. For instance if there is excess supply of money in the market this committee will sell the securities in the market and money will come back to FRB.

But sometimes it may happen that these three entities action may overlap like BOGs may take the decision CRR and SLR which has a direct impact on money supply wehre as open market activities may also have an athority to regulate it through buying and selling securities in the market.. Federal banks may take decision regardin interest rates and bank rates which may affect openmarket operaqtion and so on. more or less thses three are different entities but their functions are more or less same so there is full chance of ovelaping the responsibilities. For this purpose proper coordination among three agenciies is must.

D) Technocrat: Any specilist of any technology is technocrat. There may be computer tachnocrat, there may be machanical technocrat, there may be civil technocrat.. A person who is having a special skill or knowledge about that particular technology is called as technocrat.There are different skills machanical, internet, software, building infrastructure, artificial inteligence etc. So technocrat are every wehre.