The United States Federal Reserve System
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The Federal Reserve's monetary policy effects both the production of the economy and the employment rate differently. This paper suggests that by increasing the cost and availability of money and credit, the Federal Reserve directly affects the the economy by providing capital for investments (labor, software & equipment, real estate, factories, etc.). By conducting monetary policy aimed at keeping inflation low, the Federal Reserve reduces business and consumer uncertainty while boosting both consumer and investment spending, leading to even further increases in production and employment (labor, the economy and monetary policy).
From the Paper:"The United States Central Bank, the Federal Reserve, controls and influences the money supply in the economy. The Federal Reserve was founded by Congress in 1913 to provide the nation with a safer, more flexible, and more stable monetary and financial system (The Federal Reserve System Purposes and Functions, 2009). Money Supply and Demand can be influenced by the Fed to expand or constrict the supply of money circulating in the economy. The Fed uses Open Market Operations to do this. Open Market Operations are the process of buying or selling securities in the open market to control monetary growth or interest rates (Glossary of Economic Terms, n.d.). This process is overseen by the Federal Open Market Operations Committee (FOMC) which is made up of the 7 members of the Board of Governors of the Federal Reserve and 5 of the twelve Federal Reserve Bank Presidents. The FOMC purchases and sells government bonds to either increase or decrease the supply of money in the hands of the public. If the Fed wanted to increase the money supply, the Department of The Treasury would authorize the printing of more money to fund the public purchase from the bond market. The newly printed money would now be in the hands of the public and the money supply curve would shift to the right (Mankiw, 2007). "
Sample of Sources Used:
- The Federal Reserve System Purposes and Functions (2009). Retrieved March 11, 2010, from http://federalreserve.gov/pf/pdf/pf_1.pdf
- Glossary of Economic Terms (n.d.). Retrieved March 11, 2010, from http://johnsirons.site.aplus.net/About/articles.php?name=saved/blo.htm
- Labor, the Economy and Monetary Policy (n.d.). Retrieved March 11, 2010, from http://www.dallasfed.org/educate/everyday/ev8.html
- Mankiw, N. (2007). Principles of Economics (4th ed.). Mason, OH: Cengage Learning.
- Monetary Policy Report to the Congress (2010, February 24). Retrieved March 11, 2010, from http://federalreserve.gov/monetarypolicy/files/20100224_mprfullreport.pdf
Cite this Term Paper:
The United States Federal Reserve System (2010, April 08) Retrieved December 06, 2019, from https://www.academon.com/term-paper/the-united-states-federal-reserve-system-119187/
"The United States Federal Reserve System" 08 April 2010. Web. 06 December. 2019. <https://www.academon.com/term-paper/the-united-states-federal-reserve-system-119187/>