The Importance Of The Federal Reserve System

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In different parts of the world, every day of the year different types of transactions are carried out, using as an intermediary which is the engine that moves the world, the money. Every country has its own currency, which has some features or specific restrictions such as where and how it can be used and has the same value. Both in Puerto Rico and the United States used what we know as the dollar also equivalent to 100 cents. There are two types of agencies of the Government of the United States who are responsible or liable for the proper functioning of the currency flow between individuals, businesses and state; The Federal Reserve and the Treasury Department.

The Federal Reserve System is the central banking system of the United States. …show more content…

Conduct monetary policy by influencing the monetary and credit conditions in the economy, seeking maximum employment, stable prices, and moderate interest rates long term. Supervising and regulating banking institutions to protect the banking and financial system of the country and protect the credit rights of consumers. Maintaining stability and containing risks that may arise in the financial system. Providing financial services to depository institutions, government, and foreign official …show more content…

Open Market Operations. First, the Fed buys financial instruments to put more money into circulation. With more money available, interest rates tend to decrease, and thus more money is borrowed and spent. Second, the Fed sells financial instruments to put money out of circulation caused interest rates to rise, making loans more expensive and therefore less accessible. Third, the Fed regulate the amount of reserves. A bank lends most of the money deposited in it. If the Fed says they should keep more reserves, the amount of money a bank may lend decreases, making the most inaccessible credits and causing increases in the interest rate. In addition, change the interest rate at which banks can ask the Federal Reserve System. Member banks may borrow short term to

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