Federal Reserve Paper

Running head: Federal Reserve Paper

Federal Reserve Paper

University of Phoenix

. In order to buy anything in today’s market one has to have money or purchasing power. Money is defined as “anything that is generally accepted as payment for goods and services and repayment of debts Money is an abstraction, idea or concept, token instances of which are the physical bills or coins which are carried and traded.” (wikipedia.org.) Money has four functions. The first function is medium exchange. This is the exchange of goods and services, which avoids using a barter system. The second function is unit of account. This is the numerical unit of measurement, such as coins and dollar bills. The third function is store of value. This is when money can be saved, stored and retrieved in due time and be useful. The final function is standard of deferred payment. This is an agreement by the parties as an accepted way to settle money.

With the fluctuating economy, it is the responsibility of the Federal Reserve to monitor our nation’s monetary system. According to the Federal Reserve Bank of Dallas, “today, the Fed's three functions are to provide and maintain an effective and efficient payments system, to supervise and regulate banking operations, and to conduct the nation's monetary policy. Although all three of these roles are important in maintaining a stable economy, monetary policy is the most visible to many citizens. Monetary policy is the strategic actions taken by the Federal Reserve to influence the supply of money and credit in order to foster price stability and maintain maximum sustainable economic growth. Through these actions, the Fed helps keep our national economy strong and the world economy stable.” (dallasfed.org.)

The U.S economy has been taking a plunge. Summarizing the recent Monetary Policy Report to the Congress dated July 21, 2009. “In the early part of the year, economic activity dropped drastically, and strains in financial...