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Federal Reserve - Essay Example

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Federal Reserve

The Board of Governors is appointed by the President who controls the functions of the Federal Reserve System. There are Federal Reserve Banks which operates in major cities of US. The major objectives of the Federal Reserve System are aimed at the welfare of the US economy. The Federal Reserve System in US is responsible for maximizing the employment opportunities in US, stabilizing the prices in US economy and achieving stability in long term interest rates (Wells 58). The monetary policy is designed by the Federal Reserve System of US. The other functions of the central banking system in US include regulation of the banking structure that includes the government and the private players as well as the advisory councils. The central bank also provides financial services to other depository agencies. The overall financial stability of the economy of US is the responsibility of the Federal Reserve System. Before the Federal Reserve System was set up in 1913, there were around 30000 currencies in the economy of US. Many business houses and even the drug dealers could issue currency notes for financial transactions. This created a situation of instability in the economy of US. ...
Apart from this, the various currencies in US had different denominations and values. The absence of a standardized currency created difference and problems among the traders. The business, imports and exports all suffered due to the presence of varying numbers of currencies and absences of standardized form of currency in the economy of US. The Federal Reserve System of the US was created to standardize the currency of the economy of US and thereby establish a position of stability in the economy (Grey 98). The Federal Reserve System provides a central banking system to the economy of US where the business and he individuals could deposit their money in the standard currency of US dollar. The depositors could also withdraw their money from the Federal Reserve System at the time of need. These withdrawals took place in the same standardized currency of US dollars. Thus the Federal Reserve System could drive away the intermediate currencies and their varying values and established a standardized form of currency to be followed by the customers and traders in order provide an organized monetary system and sufficiency in liquidity. The US economy invariably needs the Federal Reserve System in the economy without whose functions there would be ample distortions in the economy that would hamper the economic growth of US. This could be understood from the roles and responsibilities of the Federal Reserve System and the implication on the US financial and economic system in absence of its role. The Federal Reserve System plays the role of balancing between the centralized role of the government for the welfare of the economy and the private interests of the ...Show more

Summary

Need of Federal Reserve for the US: Justification The Federal Reserve System is the central banking structure of US. The Federal Reserve was established in 1913 with the need of a central financial system in the economy of US. The central banking system was set up under a situation of continuous financial panics in the economy of US…
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Federal Reserve essay example
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