Neonatals

Chap 4 - The U.S. Federal Reserve and the Creation of Money
Central Bank - has as a primary role is to maintain the stability of the currency and money supply for a country or group of countries.Central Banks and their purpose – (1) monetary authority: It accomplishes its goals through monetary policy. (2) Reserve Banks : By doing so, central banks require private banks to deposit requiredreserves. (3) European central banks: During a financial crisis, central banks perform the role of lender of last resort for the banking system. Most countries have a central bank.(4) Central Banksshould be independent : They should be independent from the government. Not influenced for short- term political purposes.
Functions of Central banks – (1) Risk Assessment: The process of determining thelikelihood that a specified negative event will occur. (2)Risk Reduction: Reduce vulnerabilities and increasing financial system’s ability to absorb unexpected events. (3) Oversight of paymentsystems: The central bank’s function whereby the objectives of safety and efficiency are promoted by monitoring existing and planned systems. (4) Crisis management: The identification of threats to anorganization and its stakeholders, and the methods used by the organization to deal with these threats.
The Central Bank of the United States:The Federal Reserve System, is the most important agent in themoney supply process. Also called the Federal Reserve or “The Fed”
Board of governors - appointed by the president and approved by the congress, have seven members manage the Fed.
Federal ReserveBanks - Consists of 12 districts and each district has a Fed and its own president.
Instruments of Monetary Policy
The fed has several tools with which it influences the amount of money in theeconomy and the general level of interest rates. They are:
* Reserve Requirements
* Open Market Operations
* Open Market Repurchase Agreements
* Discount Rate...