The Federal Reserve has made some actions recently due to the nation's money supply. This article reviews what the Federal Reserve is doing, and why they have acted this way. Toward the end of this paper, I"ll give my opinion on whether I believe the action being taken is correct or not. .
The Federal Reserve has cut a key short term interest rate by a quarter of a percentage point. This is the first action taken since the beginning of December. With a recent sharp drop in the nation's supply of money, this could be signaling that the U.S economy will stall again. After a similar change in the money supply occurred last summer during the economics initial rebound form the recession, economic growth vanished in the second half of the year. Because of the year's experience, officials don't want to take any chances; it seems like too big of a risk to ignore. Federal Reserve officials say they aren't sure what caused the decline in the M2, or what it says about the economy's future.
Financial analysts say the quarter point drop in federal funds is an unsure plan, because it will be enough to cause major banks to lower the 6.5% prime lending rate. Also, Economists watch the M2 movement closely because it signals the economic shift. The M2 includes currency in circulation, checking and saving deposits, certificates of deposit less than $100,000, and most money market mutual fund shares. The rates banks charge each other for overnight loans and anchoring most other short interest rates came as major retailing chains reported different results, after strong gains. By doing this the Fed hopes to encourage more money growth in different ways. The first step is to lower rates by the public giving up less by way of forgone interest. Secondly, with lower rates, more borrowing will take place and interest payment will go down. Now, as banks lend money, the cash the Fed supplies to the banking system is multiplied several times over and money expands.
THE FEDERAL RESERVE SYSTEM CONTENTS I. ... Federal Reserve System-Overview 5 III. History of the Federal Reserve Act and Amendments to 8 IV. ... THE FEDERAL RESERVE SYSTEM The Federal Reserve System is the central banking authority of the United States. ... HISTORY OF THE FEDERAL RESERVE Before Congress created the Federal Reserve System, periodic financial panics had plagued the nation. ...
There are three instruments of monetary policy that the Federal Reserve uses; open market operations, the discount and federal funds rates and the reserve requirements. ... The first tool the Federal Reserve uses is open market operations (OMO) to influence the supply of bank reserves. ... This rate is higher than the federal funds rate because the Federal Reserve wants to discourage excessive borrowing. ... The required reserve ratio is a percentage of deposits that the Federal Reserve requires each bank to keep on hand. ... If the Federal Reserve lowers the reserve ratio, it encourages econo...
To better understand the Federal Reserve System it is important know the structure of it. There is a network of 12 Federal Reserve Banks and 25 branches that make up the Federal Reserve System, and they are all monitored by the Board of Governors in Washington D.C. ... The Federal Reserve is independent from the rest of the government. ... There are five main financial services that the Federal Reserve System performs. ... The Federal Reserve System is what makes the United States economy function effectively. ...
The effectiveness of the monetary policy of the Federal Reserve Our nation's central bank, known as the Federal Reserve, is responsible for conducting the US monetary policy. ... In order to manipulate the money supply, the Federal Reserve uses three tools: the reserve requirement, open market operations, and the discount rate. Reserve requirements are percentages of deposits that banks may not lend and must hold as vault cash or on deposit at a Federal Reserve Bank. ... If the Federal Reserve believes there is not enough money in circulation, then they will buy the securities from ...
The Federal Reserve System is the central bank of the United States. ... However, it was Wilson who initiated the Federal Reserves' board of governors. ... Also, another difference in the Federal Reserve Act was the provision that all nationally chartered banks must be members of the Federal Reserve System. ... The Federal Reserve Act provided for the establishment of up to 12 Federal Reserve Banks (district banks) to coordinate policy with a seven-member Federal Reserve Board in Washington. ... For example, the name of the Federal Reserve Board was changed to the Federal Reserve Board of...
The Federal Reserve System, What is it? ... Today I intend to inform you on The Federal Reserve System and answer all of the above questions. ... The Federal Reserve System is the central bank of the United States. ... Also, each member bank is required to buy stock in its district Federal Reserve Bank. ... The Federal Reserve System "conducts monetary policy using three major tools:" 1. ...
Today, there are four main roles that often fall within the workings of the Federal Reserve (The Federal Reserve Board, chapter 1). ... In terms of the general structure and makeup of the Federal Reserve, it is composed of a Board of Directors that are located in Washington DC, along with twelve regional Federal Reserve banks that tend to oversee the banks that fall under their respective region al jurisdiction. ... At the same time, the Federal Reserve also ensures that it is able to keep in check the open market operations and it achieves this inherent goal through the Federal Open Market C...
Tali Gill-Austern Macroeconomics The Federal Reserve System Established in 1913 as per the Federal Reserve Act, The Federal Reserve System (Fed) was first designed to stabilize and regulate monetary and fiscal systems. ... The Federal Reserve System is made up of four interconnected divisions that have there own responsibilities separate from the other parts. ... Combined with the Federal Open Market Committee, these are the tools of the Federal Reserve System. ... The other five members of the FMOC are Federal Reserve Bank presidents, "traditionally with the Chairman of the...
THE FEDERAL RESERVE This course and the previous course of macroeconomics have helped me to have a much better understanding of how our economy is affected by the government. ... One subject I found interesting and relates closely to my employment in the mortgage banking business is the Federal Reserve System. The Federal Reserve has many functions. ... Food stamps are also processed and redeemed by the Federal Reserve. The Federal Reserve also processes and clears payments made by checks or electronically thru banks. ...
