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Essay / Research Paper Abstract
This 4 page paper examines the functions of The Federal Reserve which include the control of monetary policy, supervision of the banks, maintenance of a stable financial system and the financial services to depository institutions. The bibliography cites 4 sources.
Page Count:
4 pages (~225 words per page)
File: TS14_TEfederalR.rtf
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Unformatted sample text from the term paper:
in 1913 under the Federal Reserve Act. Current duties and responsibilities have been in place since 1951, following a short period from 1933 when Roosevelt made the Federal Reserve subsidiary
to the executive. In 1953 an accord was signed between the Treasury and the Federal Reserve which gave the Federal Reserve full monetary policy independence (Smale, 2005). The main goals
are for the Federal Reserve to act as the supervisor for the banking sector, to use open market operations to implement monetary policy with the use of the reserve ratios
and the discount rate, to maintain a strong payments system, to control the amount of currency in circulation. These duties can be considered individually, dividing them into four main functional
areas; the first and main duty is that of monetary policy which is undertaken by influencing money supply and credit conditions with the aim of realising stable prices, maximum employment
in the control of long-term interest rates. The main tool used by the Federal Reserve is the setting of different interest rates.
The open market operations are perhaps the main tool. This is the decision on the sale and the purchase of securities, which equates to the setting of interest rates for
federal and treasury securities (Federal Reserve, 2007). The impact is due to the way the impact on the rate obtained by depositors investing in the Federal Reserve. The depositors
are the institutions using the overnight rates. There is a domino effect; as the higher interest rates will then pass down the supply chain. The federal funds rate can impact
on the economic conditions due its ability to increase or decrease the flow of money. The second tool is the setting of the discount rate. This is the rate that
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