The Importance Of The Federal Reserve System

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Recommended: Core concepts in economics

Have you every wondered “what is economy?” “What is economy used for?” Well you have come to the right place! Economy is the study of production, distribution, and consumption of wealth in the human society. Economy has a lot of terms and different rules on how the things in today’s society work. Without knowing these things life in the real world would just be hard and confusing. No worries here you will learn about all the things that you need to know about economy and how the process works.
The most powerful system in economy is the Federal Reserve System. For those who don’t know, a Federal Reserve System is a privately owned publicly controlled central bank of the United States. Whenever a local bank needs more money for their bank in order to provide loans they go to the Federal Reserve Bank in order to borrow the money. The Federal Reserve loan policy is that if it’s an “easy money” policy that’s in effect then the interest rates are low and the loans are easy to get. It’s important in this economy because without it the banks would have had loaning problems and they would have run out of money. It was originally created by the congress to provide the nation with safe and stable financial and monetary system.
On the other hand monetary policy is the expansionary or contraction of the money supply in order to influence the cost and the availability of credit. The three major and two minor tools that the fed can use to conduct monetary policy are easy money policy, tight money policy, reserve requirement, open market operations, and the discount rate. With the easy money policy the Fed allows the money supply to grow and interest rates to fall. This stimulates the economy when the interest rates are low people buy on cred...

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...tem. As of right now they are doing their job of monitoring the inflation rate, unemployment rate, etc.
In conclusion, economy is the study of production, distribution, and consumption of wealth in the human society. All these things have a position in our everyday lives like paying taxes in food, making sure your doing your best at work in order to not be unemployed. Raising the price on a good due to increase of labor prices and raw materials which is the result of a cost-push inflation. The Federal Reserve System is the main privately owned controlled central bank of the united states that is keeping the money flowing to our pockets and bank accounts, otherwise people would be having scavenger hunts looking for pennies, and dimes all over town. All these systems in the economical world are keeping the world happy like they say “money makes the world go round”.

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