Kudler Macroeconomics
The U.S. Federal reserve was created in 1931 to oversee the economy. The headquarters are located in Washington, DC. The basics of creating the Federal Reserve were to create a banking institution which will act as the strong base for all financial institutions. In this assignment the important factors of Macroeconomics are discussed as they impact the economy in reference to Inflation, Unemployment and Gross Domestic Product (GDP). In a nutshell, Macroeconomics involves detailed study of economic activity to maintain a stable and potentially successful economy.
To begin understanding the Macroeconomic factors impacting our economy, understanding of the Federal Reserve is important. The Federal Reserve (FED) not only performs as any other commercial bank but also looks into compliance for all financial institutions to maintain correct flow of finances. Clearly one can say that the Federal Reserve plays a vital role in stabilizing the economy with controlling the money supply (Wolters Kluwer business, 2007). The way FED controls the money supply is specified in the assignment further. The Federal Reserve operates under two basic assets:
a) "Securities," are mainly public debts and are generated by the government in the form of bonds, notes and bills in the treasury (McConnell & Brue, 2004).
b) "Loans to Commercial Banks," are the interest rates at which the FED gives out loans to commercial banks creates revenue. Also, these loans are liabilities to these banks, hence their repayment is imperative ( McConnell & Brue, 2004).The most important aspect of generating money is using these assets carefully. A committee called the Federal Open Market Committee (FOMC) constitutes of Governors and FED regional presidents. The purpose of this committee is to meet eight times within the course of a year to discuss and implement changes of flow of money within the FED to maximize revenue. FOMC believes in selling and buying of Treasury bonds. The Feds can...
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