Question

In your own words (at least 200) State what Federal Reserve Bank does and why their existence is necessary for the economy.

Answer 1

Federal reserve bank has a very important role in the country as it is responsible for maintaining the money supply in the economy by printing the currency notes as Federal reserve bank is the only institution that can print the currency notes. Federal reserve bank is also responsible for controlling the inflation in the country through the control of money supply and it also sets the various rules and regulation for the proper functioning of the commercial bank in the country. Federal reserve bank can also help the government, in the event of depression, by selling and buying the securities through the open market operations. Without the Federal reserve bank, an economy cannot function properly because Federal reserve bank sets the various rules and regulation and can change them according to the requirement of the country in order to maintain the functioning of the various financial institution. Federal reserve bank can also help the country in the event of a recession through its monetary policy.