Got a tricky question? Receive an answer from students like you! Try us!

Federal Reserve: iInflation - Essay Example

Only on StudentShare
College
Author : ogleichner
Essay
Miscellaneous
Pages 5 (1255 words)

Summary

The Federal Reserve, or the Fed, is the agency responsible for regulating the quantity of money in the US economy and for ensuring the health of the banking system (Mankiw, p. 634). The Fed's functions are comparable to the functions of a central bank, such as the Bank of England or the European Central Bank…

Extract of sample
Federal Reserve: iInflation

It also acts as the bank's bank, meaning that the Fed is the lender of last resort to banks that need to borrow money to maintain stability. Fed's second and most important task is to control money supply. A special committee at the Fed Reserve - the Federal Open Market Committee - directs the US monetary policy.
Natural disasters cause inflation. This is so, because natural disasters, such as hurricanes or earthquakes cause losses that reduce real variables, such as physical products or property. This increases the demand for these variables, because people need to restore the physical losses. Higher demand and decreased output has the effect of increasing price levels and people have to pay more dollars the same quantity of goods and services.
For example, after Hurricane Katrina, and Hurricane Rita energy prices increased significantly (Olson, 2005), because of limited supply and increased demand for gas and petroleum products. Higher gasoline, natural gas and petroleum products prices led to increased costs of other goods and services, such as transportation and building materials. Higher price levels reflected in a higher inflation rate.
The Fed is run by a Board of seven governors appointed by the President and confirmed by the Senate (p. 634). ...
Download paper

Related Essays

Federal Reserve
The prevailing outlook over the next couple of months is definitely bleak, and it seems the only way out of it is for the government to launch a stimulus plan to revive the floundering economy.…
2 pages (502 words)
Federal Reserve and the Open Market
government, and foreign official institutions, including playing a major role in operating the nation's payments system (Federal Reserve, 2006).…
4 pages (1004 words)
The Federal Reserve System
The Federal Open Market Committee (FOMC) consists of the Board of Governors and Federal Reserve Bank Presidents. The FOMC is the monetary policymaking body that creates policy designed to stimulate economic growth, full employment, stable prices, and a sustainable pattern of international trade and payments. It makes responsible decisions concerning the open market operations. In addition, the FOMC directs system operations in foreign currencies.…
3 pages (753 words)
The Federal Reserve Board
The Federal Reserve Board, commonly called the Fed, is the federal banking system, its governors, and its regulatory mechanisms. It has a board of governors known as the Federal Reserve Board, regional banks, and smaller banks that own shares in the federal system.The Fed is responsible for regulating the economy through the control of the money supply. They are also charged with the oversight of the banking industry to insure compliance by the participants. They also act as the servicer for several other banking institutions.One of the primary functions of the Fed is to stabilize the economy.…
2 pages (502 words)
U.S. Federal Reserve System.
Moreover, the system is operating in United States to provide exchange benefits among different regions, to control the money supply and demand fluctuations, to control arising systematic risks in financial market, to fulfill liquidity needs and to manage and supervise banking institutions (News Events, 2009).…
2 pages (502 words)
Federal Reserve
The article argues that even as the Federal Reserve has been in existence since 1913, it wasnt until the 1970s that it assumed as great a control of the American financial system as it has today.…
2 pages (502 words)