The U.S. financial market affects the economy majorly. They have open-market operations which is the buying and selling of securities in the “open market”. Open-market operations have the ability of taking funds out of the market and raise short-term interest rates. They increase or decrease bank reserves at the initiative of the Fed. Securities are found to be a major group of bank assets and account for one-fifth of the total assets. Finally, interest rates are the basic price that equates the demand for supply and loanable funds in the financial market. (Melicher & Norton, 2011, p.180) Three ways the U.S. financial market impact the economy. Financial markets help to direct the flow of savings and investments in the economy. When the economy is down people are not able to invest in stock markets, which can affect businesses. They are not able to grow large enough to meet the needs of the country. When people began to invest in the stocks and take risks, there is chance that the stock could crash. Financial markets impact individuals by the loss of money applied to the stock market and cause the U.S. to go into more debt. When the Federal Reserve wants to boost the economy, they will either reduce the interest rates or raise the rates to slow down the economy. …show more content…
Federal Reserve. The U.S. Federal Reserve is known as the central bank of the United States, promoting sustainable growth, and known as the gatekeeper of the U.S. economy. Federal Reserve is responsible for monetary policy, regulating the banking system, and maintaining the stability of the financial system. They provide certain financial services to the U.S. government, U.S. financial institutions, and foreign official institutions. In addition, they play major roles in operating and overseeing the nation’s payment systems. About the Fed (2014, June 19). Retrieved from