The FED can act as the lender of LAST RESORT if there is a bank run.FUNCTIONS OF THE FED3.(i) Supervises and regulates banks – example: sets reserve requirements which are currently 10 %(ii) Provides Financial services – the “Banker’s Bank.” The Fed provides currency, check, and electronic funds processing to ensure a safe and efficient payments system.(iii) Processes financial transactions for the Federal Government & distributes paper and coin currency. (iv) Conducts monetary policy to stabilize PRICES and inflation for a healthy economy.HOW DOES THE FED HELP THE ECONOMY?The Fed uses MONETARY POLICYto supply the right amount of money to the economy. How do they do this? The Fed sets certain interest rates which affect the interest that consumers andbusinesses will pay on any money they borrow.
Lower Interest RatesLoans are cheaper More borrowing Loose money supplyHigher Interest RatesLoans more costly Less borrowing, Tight money supplyFEDERAL RESERVE STRUCTUREAlthough the FED has characteristics of both private companies and governmental agencies, it serves the public interest and is under the control of Congress . The goal of the FED is to be outside the influence of the political process so if functions separately from the government. FEDERAL RESERVE - Take the 4-question assessment at the end of the module to test your knowledge.STRUCTURE OF THE FEDERAL RESERVE SYSTEM 12 FEDERAL REGIONAL RESERVE BANKSFACT CHECK : WHO IS THE CURRENT FED CHAIRMAN? Jerome H. PowellTRIVIA: The Fed Chair currently earns $201,700 and the other Board Governors earn $181,500.The Federal Reserve Building, Washington, D.C.
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