Federal Reserve

Federal Reserve

Linda Tate

ECO/212

February 14, 2013

Hib Shelton

Federal Reserve

The nature of money is very important to the concept of understanding the world's financial system. The bank for the United States is the Central Bank, also known as the Fed, or The Federal Reserve. It manages the monetary system by implementing monetary policies.

Purpose and Function of Money

The purpose of money is to barter and exchange things and services that are of value between people. It is an asset that people are willing to accept for goods and services or for payment of debt (Hubbard, and O' Brien, 2013). It has three important functions, it is used as a medium of exchange for goods and services that suppliers will accept in exchange for these services and people sell goods and services for money to buy what they want. It is a unit of account in a barter system, some goods used for money has one price rather than possessing many prices, this supplies sellers and buyers alike a unit of account. This also measures its value in the economy in sense of money. Dollars are used in the United States (U.S.) economy as money and all goods is priced in terms of dollars. Money is also used as a store of value, if a person does not use all of their money to buy goods and services in one day, he or she can keep, and use it in the future. (Rhonda Ham and Linda Tate, February 7, 2013).

How the Central Bank Manages a Nation's Monetary System

Also known as the Fed, the Federal Reserve System is the central bank of the U.S. It is the center of the nation's financial system, and manages the nation's supply of money and credit (The Federal Reserve Bank of San Francisco, 2013). It provides financial services for the Treasury, and it serves as banker for the federal government. It supervises the business of money, and payment services, such as check-clearing and electronic funds transfers. It also administers consumer protection laws that are finance-related. Central Bank enforces monetary policies to control money and the credit flow in the economy. The Fed works to balance monetary policies in hopes to keep businesses productive, prices steady, and workers employed.

What are the Federal Reserve and its Role?

The Federal Reserve is an independent system within the government, having both public and private purposes. It is the nation's central bank and it obtains its authority from the U. S Congress. Because it is independent its decisions are not ratified by the president, the executive, or the legislative branches of government. It does not receive funding from Congress; it is however, subject to oversight by Congress. The Federal Reserve is responsible for supervising and regulating banks to ensure the safety of the nation's financial system, and the credit rights of consumers. It conducts the nation's monetary policies; it provides financial services to the U.S government, banks, the public, and foreign official institutions (Federal Reserve education, 2013).

Direction of Monetary Policies and Actions Taken

Stated monetary policies seek to stabilize prices and promote employment. With a suitable policy compromise economic growth will move forward at a moderate speed, and unemployment will decline. T obtain a stronger economic recovery as well as ensure that inflation is at a consistent rate, the committee is buying mortgage-backed securities at $40 billion a month, and long-term Treasury securities at $45 billion per month. These actions may help maintain falling pressure on long-term interest rates, help mortgage markets, and make broader financial conditions better. The monetary police committee will continue to support progress toward maximum employment, and price stability, and take a balanced