Federal Reserve System Flashcards, test questions and answers

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What is Federal Reserve System?

The Federal Reserve System, also known as the Fed, is the central banking system of the United States. It was created by Congress in 1913 to provide the nation with a more stable financial system and to help regulate economic activity. The Federal Reserve has many responsibilities, including conducting monetary policy, regulating banks and other financial institutions, providing banking services to depository institutions and government entities, supervising and regulating the nation’s payment systems, managing foreign exchange operations, maintaining stability of the financial system through its lender-of-last resort function, and overseeing consumer protection laws. The Federal Reserve System is composed of 12 regional Banks that are located throughout the country. These regional Banks are overseen by a Board of Governors in Washington D.C. Each regional Bank has its own nine-member board of directors who oversee its activities within their district and report back to the Board of Governors on a regular basis. The Board of Governors is made up of seven members who serve 14 year terms appointed by the President with Senate confirmation required. The Federal Reserve System’s primary responsibility is setting monetary policy for the US economy. This involves setting short-term interest rates which influence economic growth as well as controlling inflationary pressures in order to maintain price stability over long periods of time. In addition to setting interest rates, it can also buy or sell securities like Treasury bonds on behalf of banks in order to increase or decrease money supply within an economy this practice is known as open market operations (OMO). It also regulates banks such as those belonging to FDIC (Federal Deposit Insurance Corporation) through various policies like capital requirements for mortgages and other loans that can ensure safety for borrowers during times when there may be instability within markets or economies overall. In addition to setting monetary policy for US markets and overseeing banking regulations domestically, The Federal Reserve System has some responsibilities abroad such as involvement with international organizations like IMF (International Monetary Fund), World Bank Group & SWIFT (Society For Worldwide Interbank Financial Telecommunication). They are also involved in helping countries develop strong currencies through currency swaps between nations which helps them manage currency volatility while still having access necessary funds during times need it most. Finally they maintain relationships with multiple foreign central banks which allows them better understand global economic trends & conditions so they can better formulate their own policies accordingly here at home too.