Question

Describe in detail the operations of the federal reserve system.

Answer 1

Federal Reserve system is the central bank of United State it was created by the Congress to provide the nation wide a safer more flexible and more stable monetary and financial system . The Reserve banks of the US Treasury by handling its payment selling government securities and assisting with its cash management.

The Federal Reserve system has four functions : 1. Manages inflation - Its most visible function is to manage inflation as a part of this function the Federal Reserve system also promote maximum employment and ensures interest rates remains moderate over time. The Federal Reserve system manages inflation while promoting maximum employment and stable interest rates the Federal Reserve system sets a 2% inflation target for the core inflation rate.

2. Supervises the banking system - The Federal Reserve system supervises and regulate the Nation's largest banks to protect consumer. The Federal Reserve Banking system is a network of 12 Federal Reserve banks under the supervision of the Board of Governors. These 12 banks both supervise and serve as banks for commercial banks and their region.

3. Maintaining the stability of financial system -It maintains the stability of the financial market and constraints potential crisis. Each bank with over $50 Billion in assets had to submit a living well to the Federal Reserve system it outlined how the bank would safely wind down if facing a financial crisis.

4. Provides banking services - The Federal Reserve system provides banking services to other banks , the US government and foreign banks. The Federal Reserve system is called the bankers bank because each Reserve Bank stores currency, processes, check and make loans for its members to meet their reserve requirements when needed.