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Macroeconomics Term Paper11/10/2018The Federal Reserve & Quantitative Easing: An AssessmentThe Federal Reserve System is comprised of the Board of Governors, the 12 Federal Reserve Banks, and the Federal Open Market Committee which is made up of members from the Board of Governors and the Presidents from each Reserve Bank. The Chair of the Board, currently Jerome Powell, also serves as chair of the Federal Open Market Committee (FOMC). This system collectively acts as the Central Bank of the United States. The main features of the Federal Reserve are its central governing board, decentralized operating structure of 12 Federal Reserve Banks, and a combination of public and private characteristics. The five key functions performed by the Federal Reserve include conducting the United States’ monetary policy, promoting stability in the financial system and the safety and soundness of individual financial institutions, fostering payment and settlement system safety and efficiency, and promoting consumer protections and community development. (The Federal Reserve System Purposes &Functions - Section 1, pp. 1-3)Members of the Board of Governors are nominated by the President of the United States and must be confirmed by the United States’ Senate. The Board is responsible for overseeing the 12 Federal Reserve Banks and providing general guidance for the Federal Reserve System overall. The decisions and actions of the Board of Governors and Federal Open Market Committee are made independently and in the public interest, designed to advance our economy’s health and ensure the continued stability of our financial system. Congress created the Federal Reserve in 1913 to give the nation a safer, more stable monetary and financial system. The Federal Reserve Act mandated that the Board of Governors and the Federal Open Markets Committee conduct their monetary policy, “so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.” (The Federal Reserve System Purposes & Functions - Section 3, p. 23)As described in our textbook, Economics, by McConnell, Brue, & Flynn, the 12 Federal Reserve Banks act collectively as the Central Bank of the United States to set monetary policy and regulate the private banking system under the direction of the Board of Governor’s and the Federal Open Market Committee. The Federal Open Market Committee is a 12-member group within the Federal Reserve System that decides U.S. monetary policy and how it will be executed through open-market operations. (p. 929) The Federal Reserve utilizes its monetary policy to meet their mandate from Congress calling for maximum employment, stable prices, and managing moderate long-term interest rates. In the United States, the Federal Reserve is tasked with overseeing monetary policy and keeping inflation in check. This involves choosing a target for the short-term nominal interest rate, also known as the federal funds (Fed funds) rate. The choice of target rate fluctuates based on various economic