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What Are The Objectives Of The Federal Reserve

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The Gross Domestic Product (GDP) in the U.S. was at $18036.65 billion in 2015. The U.S. GDP is 29% of the world economy. The economy has a highly-developed and technologically-advanced services sector, accounting for about 80% of its output, and is dominated by services-oriented companies such as technology, financial services, health care and retail. The manufacturing base represents 15% of output, and is the second largest manufacturer in the world and a leader in higher-value industries such as automobiles, aerospace, machinery, telecommunications, and chemicals. Large amounts of arable land, advanced farming technology and government subsidies make the U.S. a net exporter of food and the largest agricultural exporting country in the world. The overall health of the U.S. economic growth is constantly being driven forward by research and development. However, the government does spend more money than it takes in. The largest portion of government spending is in the entitlement programs like Social Security and Medicaid. …show more content…

The federal funds rate, the main interest rate managed by the Fed, is the rate which deposit banks charge each other to trade funds overnight to maintain reserve balance requirements. When the Fed buys securities, the money is sent into the banking system. As the money streams into the banks, more money is available to lend because there is more money available. Interest rates will go down and borrowing and demand should increase to stimulate the economy. If the Fed buys bonds in the open market, it increases the money supply in the economy by exchanging out bonds in exchange for cash to the public. If the Fed sells bonds, it decreases the money supply by removing cash from the economy in exchange for

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