Federal Reserve

The Federal Reserve

Dell Stampley

ECO/212

May 3, 2010

Fatma El-Hamidi

The Nation’s Money Manager

The purpose of money or the reason it was invented or developed is to facilitate the exchange of values between individuals. Money is not just a means of exchange; it is also a store of value for individuals, family, or even society. Money is meant to facilitate trade and that is meant to serve both sides of the trade, otherwise why participate. The ultimate purpose of money is to make life better. The function of money requires faith in its value. If a government destroys that by printing too much money it interferes with or destroys the proper functioning. If it determines the prices that are paid for different things, instead of individuals deciding that, it also interferes with the function of money. (www.themeaniningofmoney.com) The function of money is a medium of exchange. It can facilitate the fulfillment of an immediate need or desire, or saving for a future need or desire, or provide a means for transferring means of fulfillment whether present or future.

The goals of monetary policy are to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates. When prices are stable and likely to remain, the prices of goods, services, materials, and labor are undistorted by inflation and serve as clearer signals and guides to the efficient allocation of resources and therefore contributes to higher standards of living.

The Federal Reserve System is the Central Bank of the United States. It manages our nation’s supply of money and credit and operates at the center of the nation’s financial system. It keeps the wheels of business rolling with currency, coin, and payment services, such as electronic funds transfer and check-clearing. The United States lacked a central bank until the twentieth century. Without a money manager, the nation’s financial system was like the nation itself, diverse and subject...