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The Federal Reserve - Essay Example
Author : mable52
Pages 8 (2008 words)
The Federal Reserve Evaluation of the role and the effectiveness of the Federal Reserve in stabilizing the current economy The Federal Reserve System is the central banking system of the United States that is responsible for ensuring stability in economic conditions and monetary flow in the economy…
The effectiveness of the role of the Federal Reserve System lies in the monetary policies of the bank. The responsibility of designing appropriate monetary policies is bestowed on the Federal Reserve System by the Federal Reserve Act in order to ensure availability of money and liquidity in the economy and to arrange for provision of affordable cost of credit in order to fulfil the national economic goals. The monetary policies of the Federal Reserve System are aimed at sustaining the level of productivity and create a balance between the supply and demand. The responsibility of the Federal Reserve System also encompasses controlling of inflation rates by fixation of appropriate interest rates in the financial system. The basis of the monetary policies of the Federal Reserve System lies in the inter bank lending policy (Mankiw, 2011). During the phase of revival from the period of recession in the current economy, the Federal Reserve System modified its monetary policies in order to boost consumption demand in the economy by undertaking policies to inject sufficient flow of funds. The interbank rates depend on the Federal fund rate which is determined by the Federal Reserve System. ...