Federal Reserve and Inflation
Essay by review • April 30, 2011 • Research Paper • 576 Words (3 Pages) • 1,256 Views
• пЂ What exactly is the Federal Reserve?
The Federal Reserve System is the central bank of the United States. It was founded by Congress in 1913 to provide the nation with a safer, more flexible, and more stable monetary and financial system. Today, the Federal Reserve’s duties fall into four general areas:
1. conducting the nation’s monetary policy by influencing the monetary and credit conditions in the economy in pursuit of maximum employment, stable prices, and moderate long-term interest rates.
2. Supervising and regulating banking institutions to ensure the safety and soundness of the nation’s banking and financial system and to protect the credit rights of consumers.
3. Maintaining the stability of the financial system and containing risk that may arise in financial markets
4. 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.
• Do the effects of natural disasters, such as hurricanes, cause inflation or deflation?
Effects of natural disasters do cause inflation, especially if many geographically significant resources are destroyed or wrecked; meaning that there is a higher demand and less supply of resources.
• Who is in charge of the Fed?
The Board of Governors (a government agency) is in charge of the Federal Reserve System. The members are appointed by the president and confirmed by Congress. The branches are organized more like private corporations. Each branch has 9 board members. 6 are elected by members, 3 are appointed by the Board of Governors.
• Do voters have a say in the implementation of monetary policy?
No. Monetary policy deals with the production and management of currency. It is decided by people we don't elect. We would have to elect people who would vote against the policy that is happening. No elected official does what we want them to all of the time. Theoretically Voters have control over everything but realistically we do not.
• How is inflation measured?
Inflation measurement is the process through which changes in the prices of individual goods and services are combined to yield a measure of general price change. The
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