The Federal Reserve

The Federal Reserve

Manda Pezza

Centenary College

The Federal Reserve

        The Federal Reserve also known as the Fed is the central bank of the United States, which is responsible for regulating the United States monetary system. It has been around for many decades, which where it was created on December 23, 1913. It is was signed into law by President Woodrow Wilson. Before the Fed was in effect the United States economy was finically unstable. The Federal Reserve was created after numerous bank failures and a panic among the people of the United States, which started in 1907. The bank failures led Congress to agree that the United States needed a banking system to help make sure the United States economy had a healthy and secure banking system for the future. This led to Congress finally writing the Federal Reserve Act. The Federal Reserve helps created a positive growth for the economy, which will be beneficial for the individuals of the United States for the future. Without the Federal Reserve the nation's banking system wouldn't exist and the United States economy would be a failure.

        The Federal Reserve is made up of seven board members and a chairman, who each have fourteen year terms, except the chairman who is appointed by the president every four years. They are selected by the president and then confirmed by the Senate. The seven members of the Fed are given such long terms to help them not feel political pressure and allow them to have them to have the independence to help ensure stability and continuity over time. Some of the board of governors responsibilities include, but are not limited to are to participate in the Federal Open Market Committee (FOMC), which conducts our nation's monetary policy, guide monetary policy action, guide committees that study current issues, and to explore domestic and international economic and financial circumstances. Never the less, the Fed is made up of a network of twelve Federal Reserve Banks and 25 Branches, which makes up the Federal Reserve System.

        Throughout the United States, there are two types of tools that influence the country's economy which are known as the fiscal and monetary policy. Fiscal policy is related to government spending and revenue collection to help influence the economy. Fiscal policy is led by the government, which includes the United States Congress and Treasury Secretary. There are  two basic types of fiscal policy, expansionary and contractionary, however contractionary is barely ever used. In fiscal policy they try to manipulate the level of aggregate demand in the economy to achieve price stability throughout the economy, employment, and economic growth. While, monetary policy is connected to the control of money, through interest rates and reserve requirements for the growth and stability of the economy.  Monetary policy is made up of the central bank, which includes the Federal Reserve, where they try to manipulate the supply of money to influence the economic growth, inflation, exchange rates with other currencies and unemployment. The monetary policy uses interest rates and reserve requirements as some of their tools.