Impact Of The Federal Reserve On The Economy

The Federal Reserve’s Impact on the United States Economy

When it comes to money in today’s society, it is being tossed around left and right. Every day there are trillions of transactions where money is exchanging hands. There are simple transactions such as using a debit card to buy groceries at the store or more complicated transactions like a broker is investing a client’s money into a mutual fund. Anyone who deals with transactions, such as the examples given prior, is also likely to deal with a commercial bank. Since there are so many transactions that are going on during the daily routine of a commercial bank, there needs to be many regulations in place that make sure all their business is being handled correctly. The institution that

Commercial banks have the power to become member banks if they meet the guidelines set by the Board of Governors. Those banks that decide to get a Federal charter are the ones required to buy stocks from their Federal district bank. All commercial banks do not need to be Federally chartered, but a majority of them are. The member banks provide the district banks the funds they need to maintain their operations. The Third component of the Federal Reserve System is the Board of Governors. There are seven members of the board of Governors that have offices located in Washington D.C. Governors are elected for fourteen-year terms by the President of the United States. The responsibilities of the Board of Governors include: setting credit controls, revise reserve requirements, and controlling the money supply (Madura 83). There are very important decisions made by the Board of Governors and if they do not make the right choice, it could be dire for the United States

The Federal Reserve System is made up of five parts: The Federal Reserve district banks, member banks, Board of Governors, Federal Open Market Committee, and the Advisory Committee. These five parts of the Federal Reserve work together to figure out the perfect reserve requirement ratio and balance between inflation and unemployment to ensure that the US continues to have a thriving economy. Sometimes this is not easy for the Federal Reserve to monitor the economy because of recognition, implementation, and impact lag. Because of these types of lag, the Federal Reserve is often criticized for not fixing the economy effectively, but we can see that it is not completely their fault. This leads many to wonder, “Should a non-governmental agency be in charge of regulating our countries