Working with Federal Reserve Publications

Table of Contents

Introduction2

Discussion2

FED significance3

Working, Purpose and Basic Operations of FED3

Current Economic Activity and Financial Markets3

FED view about Inflation4

Monetary Policy tools of FED4

Monetary policy impact on economic growth and business cycle5

Theoretical approaches5

Conclusion6

References7

Working with Federal Reserve's Publications

Introduction

American economy is biggest global economy that comprises of foreign investments and circulation of wealth in world trade. It is composed of numerous financial services manufacturing and banking industry, etc. Since past few decades, US economy emerged as biggest industrial or service based economy. This vast system resulted in complex banking system that regulates the process involving government, currency, instituting rules and regulations known as 'Federal Reserve System'. This complex, centralized bank regulates the system and implements policies to reduce the complexities and negative effects from economic condition of the country(Saxton, 1997).

In this paper, a brief analysis of Federal Reserve System, its assessment, economic activities, financial market and increasing inflation trends in USA will be discussed.

Discussion

Being a National Canter Bank, FED has been privileged with some grants. It monopolizes the grants of money and facilitates both government and commercial banks as a banker. It also holds bank regulatory authorities. As, FED primary goal is to centralize the reserves; large deposits, reserve notes etc, it is also responsible for reserve management and monetary policy consequently. It also regulates the stock market and credit extension (Saxton, 1997).

The FED provides country, a safe, stable as well as flexible financial and monetary system. This is the reason when economy goes down, investors focus on the FED to use its power to either spur economy or cool it down when it gets overheated.

FED significance

The significance of Fed cannot be neglected. This if due to the fact, that it controls management of net spending, demand and inflation. During the process of policy management by controlling reserves, FED affects interest rates, inflation, exchange rates, and financial markets. However, in times of crisis, FED Lender of last resort manages to stabilize the financial system (Saxton, 1997).

Working, Purpose and Basic Operations of FED

Federal Reserve FED manages monetary system in the country. It has significant control over the demand and supply of balances that depository institutions hold at the reserve banks. It also determines the value of Dollar and evaluates economic strength of the country. To bring equilibrium in supply and demand of money, it buys and sells government bonds. To increase demand and supply it buy bonds from public, and to decrease, it sell bonds to public. Thus, the basic purpose of FED is to handle banking panics, money supply in country, establishing financial stability and to furnish elastic currency.

Current Economic Activity and Financial Markets

In recent years, economic growth slowed, and country's economy entered in recession period. A great down fall in exchange rates have increased interest rates and caused depression in stock prices. The current recession has made American economy unstable and less recession prone. In the FED's point of view, there are two aspects of recession. First is that this recession is temporary and reversible, have recovery of ...