Question

students will prepare a short essay pertaining to an aspect of the Federal Reserve. From your readings this week, you recognize the role of the Federal Reserve and its impact on monetary policy and interest rates, influence on the stability of the U.S. financial system, and its role in establishing monetary policy and fiscal policy for the U.S. economy. In addition, actions and decisions made by the Fed and the Board of Governors impact the overall global economy, especially with respect to market interest rates, inflation, and economic activity. For your essay, explore one of these characteristics in depth. Provide a brief analysis essay (400 words) on your topic, and cross-referenced using the textbook and one additional primary reference source. Briefly introduce the character and focus the bulk of your essay on describing the topic impact on one or more key stakeholders. Stakeholders include individual investors, investment firms, global businesses and trade, and U.S. corporations. Use qualitative and/or quantitative data to provide support for your essay. Identify your reference sources in APA

Answer 1

The Federal Reserve is the central bank of USA. It is one of the most powerful central banks of the world and controls a high amount of the world's deposits. The Federal Reserve performs many key functions, the most important among them being:

1. Printing of currency notes
2. Controlling the money supply in the economy
3. Interest rates balancing

The monetary supply in the economy is controlled by both quantitative and qualitative factors. The quantitative ones include Open Market Operations wherein it sells or buys government owned securities in the open market so as to decrease or increase the money supply in the economy respectively. Also, the interest rates in the economy can be altered in the economy which alters the amounts that can be used by commercial banks for lending or investment purposes. Also, the Cash Reserve Ratio can be altered so as to ensure viable loaning of funds. Sometimes , qualitative actions are also taken like Credit Rationing and Moral Suasion. Usually the Central Bank's advises are adhered to otherwise it can always bring down sanctions upon erring banks.

All these are extremely important for all commercial stakeholders including individual investors, commercial banks, global trade and businesses as these limit the funds available with the stakeholders which in turn alters the levels of investments. This also affects the earnings of employees as well as the levels of inflation around the country in particular and the world economy in general.