Question

Can the FED control the money supply? Please answer in at least 3 paragraphs

Your paper should include the following:

1. Introduction –what is the question you are addressing? What are the main issues? Give the reader a quick summary of what you will explain.
2. Body
   1. Brief discussion of the text book view—exogenously controlled money (via the mm relationship).
   2. What does real world evidence suggest about the central bank’s ability to control money?
3. Conclusion – answer the question based on your analysis
4. Bibliography (use the citation style you are most familiar with)

Answer 1

Answer:

Do fed control money supply:

Introduction

Topic:

Federal reserve system is responsible for the supply of money in the economy.

By following various monetary tools and policy its the responsibility of fed to maintain and keep the money supply stable in the economy .

Main issues:

To maintain the stability of the financial system and contain systemic risk in financial markets .

To provide financial services to depository institutions, the U.S. government, and foreign official institutions, including playing a major role in operating the nation's payments system.

Summary:

Functions of the Federal Reserve System include addressing the problem of banking panics, serve as the central bank for the United States , striking a balance between private interests of banks and the centralized responsibility of government , to supervise and regulate banking institutions .

Body:

(a) monetary policy tools

Fed controls the money supply by increasing or decreasing the monetary base .Usually it uses purchase or sale of securities .

(b) They majorly target fund rates .

The goal is to ensure appropriate supply of monetary base so that the economy does not fluctuate and follow a stable growth path .