Question

Explain why you agree with the reasons given for keeping the federal reserve?

I obviously was not around when there wasn’t a Fed, therefore, I am for keeping the Fed around. According to the article, the gold standard wasn’t much of a success with 44 recessions and 6 depressions in a 100-year span. The Fed control only had 22 recessions and 1 depression. I mean, we need a system out there to manage the interest rates, regulate banks, provide national payment services, and maintain the general stability of our financial system. The fed is also a big influence on the stock market. Investors study the Fed to see how well the economy is performing and try to anticipate its actions. The fed also affects employment. When the fed lowers the federal funds rate, banks usually lower interest rates which allows businesses to receive loans and other forms of credit that they rely on. By doing this, this will lower unemployment and could cause wages to increase. Also, as interest rates reduce, more people are able to borrow, which provides more spending more which then causes the economy to grow. When the economy grows it causes inflation to increase. If there is no Fed to regulate the economy, who else would do it?

Answer 1

This is a very important thing that there is a central bank which regulates the banking sector and is able to regulate the monetary policy in an economy and contribute to the economic development of the country. The conflict often arises between the federal reserve and central government because the central government wants to increase the GDP because of their own political interest but the major objective behind why the central bank was setup is so that central bank can stabilize the price level in the economy and economy could grow at sustainable rate for that sometime sacrifice in term of GDP is made because for price stability you have to increase interest rate to reduce demand but then GDP gets hurt. The federal reserve does the most important task of regulating the banks which are very important in an economy, besides that federal reserve from time to time conducts its policies in such a way that stock market and other key participants in an economy continue to do well. During the recession the role of central banks becomes very important as they have to focus on the recovery of economies and reduce the unemployment level.