Understanding Money & Banking.docx - Federal Reserve The...

Federal Reserve
The Federal Reserve is the central bank of the United States whose job is to regulate the
U.S economy and keep it growing in a stable manner, while also keeping inflation at acceptable
levels. It does so through the regulation of private banks through the manipulation of discount
rates and reserve requirements. This in effect affects the amount of money being lent in the
American economy which contributes to the overall money supply as well as the demand for
money. In addition, the Fed is responsible for managing the check cashing system, as well as
serving as a lender of last resort.
The Fed consists of 3 key components: the Federal Board of Governors, 12 Federal
Reserve Banks and the Federal Open Market Committee. There are seven Board of Governors of
the Federal Reserve System who are chosen by the president and the senate and serve a fourteen
year term. Their role is to conduct monetary policy through increasing or decreasing the money
supply to speed up or slow down the economy. The function of the 12 Federal Reserve Banks is