Discuss the intent, purpose and function of the Federal Reserve. Has their existance strengthened the American Economic System or have they weakened it Does their existance and power constitute a protection of a Free Market or do they have more in co - Essay Example

Download file to see previous pages... The Federal Reserve also has unique functions. It addresses the challenge of banking panics; it acts as a last resort lender during a bank run; bank run involves banks borrowing money from other banks. The Federal Reserve is also the central bank of USA; hence it offers financial services to the government and manages money supply. The intention of the Federal Reserve is explained through the three monetary objectives which are; ensuring maximum employment levels, moderate interest rates and stable prices.
Enactment of the Federal Reserve Act has strengthened the economic system. This is because it maintains the national payments system. For the government, it transacts electronic financial transactions, issuing and redeeming securities, and banks treasury cheques (Hayek 277).
The Federal Reserve ensures a command system of the economy. This is because the government controls and directs the monetary policy through the rates of the Federal funds. This rate is influenced by the monetary policy tools; for example open market operations which involve transacting US treasury securities.
The Federal Fund was established as an independent institution. It is mandated to carry out all responsibilities without political or private pressures. However, it must be accountable to congress by practice or ...Download file to see next pagesRead More