U.S. Federal Reserve website - Admission/Application Essay Example

U.S. Federal Reserve Jeffry (2007) asserts, “The Federal Reserve was founded by Congress in 1913 as the central bank of the U.S.”. It was created toregulate the fiscal policy of the United States in order to achieve economic stability. Money is the key towards individual and economic success. Let us talk about the purpose and function of money. Money is necessary to run the economy of a country. “It is one of the most important concepts to be understood in the running of the worlds financial system” (Helfield, 2003).

If we talk about the functions of money, we can say that money helps people engage in the indirect exchange of products and services. Whenever we go to a supermarket or to a shopping mall, we need to have money to buy the desired products. Money serves all needs and demands of people that involve money. Without having some amount of cash in the pocket or a debit or credit card, one cannot buy anything from the market because everything has some value and that value is measured in terms of money.

Therefore, we can say that money is the resource using which we can fulfill our necessities of life. In the United States, all decisions of a person regarding use of money are influenced by the U.S. monetary policy. The Central bank develops the monetary policy and brings changes in the interest rates. Decrease in the interest rates increases buying power of the individuals and the firms whereas increase in the real interest rates increases the cost of borrowing which leads to decrease in the demand for goods and services.

Wogan (2010) asserts, “The main job of a federal or central bank is to keep an eye on the banks reserves”. The services provided by the Federal Reserve to the government include payment of treasury checks, issuance and transfer of government securities, electronic funds transfer, and maintenance of treasury accounts. So, when the Fed brings changes to its policy, every aspect of the monetary system is affected. The monetary policy of the United States is currently focusing on price stability and lending out more.

Moreover, the current direction of the monetary policy is also towards achieving low inflation target and decreasing the interest rates to increase the buying power of the firms. The FED is using intermediate indicators to achieve the goal of price stability. The Federal Reserve tends to lower the interest rates to achieve the mission of bringing improvement to the buying power of the individuals and firms. “Fiscal and Monetary polices are tools that the Federal Reserve Bank, and the government uses to help keep the economy running smoothly” (Willingham, 2009).

Monetary policies have a great influence on the economy’s production and rate of employment in a country. If the interest rates are lowered, more funds will be available to the country, which can be used to bring improvements to the lives of people. More industries and firms can be created which can create more job opportunities for the citizens. On the other hand, increase in the interest rates adversely affects the levels of production and employment in a country. Therefore, we can say that monetary policy of a country directly influences economy’s production and employment.

ReferencesHelfield, N. (2003). The Meaning of Money: Its Purposes and Functions. Retrieved from http://www.gold-eagle.com/editorials_03/helfield022803.htmlJeffry, E. (2007). How Does The Federal Reserve Affect Interest Rates?.Retrieved from http://ezinearticles.com/?How-Does-The-Federal-Reserve-Affect-Interest-Rates?&id=404238Willingham, P. (2009). Fiscal and Monetary Policy, and How They Affect the Economy and You. Retrieved from http://ezinearticles.com/?Fiscal-and-Monetary-Policy,-and-How-They-Affect-the-Economy-and-You&id=2117749Wogan, J. (2010). The Richest Federal Reserve Banks around the Globe.

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