The Federal Reserve Essay Example | Topics and Well Written Essays - 2000 words - 1

The Federal reservation - Essay ExampleThe lastingness of the position of the Federal Reserve scheme lies in the fiscal policies of the affirm. The office of designing leave monetary policies is bestowed on the Federal Reserve System by the Federal Reserve Act in differentiate to ensure availability of money and liquidity in the economy and to arrange for provision of affordable price of credit in order to fulfil the national economical 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 pick up. 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 loaning policy (Mankiw, 2011). During the phase of revival from the period of recession in the certain economy, the Federal Reserv e System modified its monetary policies in order to boost consumption demand in the economy by undertaking policies to dispense sufficient flow of funds. The interbank rates depend on the Federal fund rate which is goaded by the Federal Reserve System. ... The discount rate is determined by the Federal Reserve System looking at the demand of the economy and providing credits to the banks in required rates to fulfil the demand of liquidity in the economy. The reserve fund requirements are the gravel base held by the banks as a statutory requirement with the Federal Reserve System. The decrease in the reserve requirement as determined by the Federal Reserve policy would help to inject more liquid funds into the economy. The current economic conditions which showed a financial crisis led to the need of change magnitude direct lending by the banks and financial institutions (Allen, 1999). The Federal Reserve System played an important role in determining appropriate inter bank rate to encourage increase in lending for the business. This has been done through increase in open market operations by the Federal Reserve System that has led to the increase in the flow of liquidity ion the economy. A higher level of outturn in the current economic conditions has created the stage for revival of the economy. This in turn has led to the rise in income levels of the people thereby boosting the spending in the economy. As the banking system was severely hit during the current economic recession, the Federal Reserve System adopted measure to increase the credit to organisations other than banks. The central bank engaged in liquidity swaps with the other central banks of other countries. The usage of derivative products raised bighearted hope to the recovery of economic conditions. Thus the roles and responsibilities of the Federal Reserve System have been highly solid in establishing a position of stability for the current economy. It is through the policies of the Fed eral Reserve