Question

• Discuss one factor about the Federal Reserve Bank that you found to be most interesting.
• Summarize how you believe the existence of this bank has helped stabilize our economy.

Answer 1

In the United States, the central bank is the Federal Reserve Bank, although the primary group affecting the money supply is the Federal Open Market Committee (FOMC). Monetary policies are the actions taken by central banks to control the monetary as well as financial status with the goal of attaining low inflation and sustainable growth in the economy. The techniques that are used by the central bank under monetary policies to alter the money supply include the reserve requirements, discount rate, and the open market operations. The Federal Reserve's Control over money and interest rates for influencing the overall economy for stabilization.

The one factor that I found to be most interesting about Federal Reserve Bank is it's monetary policy. It is a vital tool for the attainment of growth and stability of the economy through lowering of unemployment and stabilization of prices. The effectiveness of monetary policy in an economy depends on it's impact on output level, employment, real wages and economic growth and so on, thus it is vital to consider it's limitations. With effective implementation of the monetary policy, the Federal Reserve can maintain stable prices, thus supporting conditions for the stable prices, moderate long-term interest rates, long-term economic growth and maximum employment of the nation.