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Unite States Federal Reserve Paper

Autor:   •  April 3, 2011  •  Research Paper  •  766 Words (4 Pages)  •  1,110 Views

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The Unite States Federal Reserve is the central bank which attempt to influence the economy by changing the level of reserves in the banking system (Lipsey, Courant, Ragan, 1999). In this text, the purpose and function of money will be define, in addition to, how the central bank manages a nation's monetary system, at least one federal reserve policy action, an outline of recent monetary policy in the US and the effects of monetary policies on the economy production and employment.

The purpose of money is for people to be able to purchase goods and services from other people all around the nation. Money has three different types of function within the economy. First, is the medium of exchange, means a buyer will give some type of an item to a seller when he or she would like to purchase the goods and services. Second, is the unit of account, means when people use the yardstick to post prices and document all debt? Third, is the store of value, an item that people can use to transfer purchasing power from the present to the future (Mankiw, 2007).

A central bank provides a group of services to commercial banks which would be the banker's bank and have bankers to manage the government's finances. The central bank has controllers that is over the money supply and has regulators that are on top of the money market. Central bank is the top bank for all bankers which are the commercials banks that the public has asses to use to make deposits, transfer balances to another account, cash checks, make withdrawals and much more. The central bank is also in a unique position to provide loans to commercial banks during hard times of crisis. According to (The Federal Reserve System), in September 2008, the government-sponsored enterprises Fannie Mae and Feddie Mac were placed into conservatorship by their regulator, and Lehman Brothers Holding filed for bankruptcy. The insurance company AIG (American International Group, Inc) also came under severe pressure, and so the US Treasury, had agreed to provide substantial liquidity to the help out the company with its financial problems. In addition, a series of other companies end up falling short or were acquired by competitors. For example, the Lehman Brothers was one of the companies that had gone bankruptcy.

Monetary policy is a policy of influencing the economy through changes in the banking system's reserves that influences the money supply and credit availability

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