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Federal Reserve Monetary Policy

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Write a 700-1050 word paper on the U.S. Federal Reserve's monetary policy

o Define the purpose and function of money
o Explain how the central bank manages a nation's monetary system.
o Outline the stated direction of recent monetary policy in the United States.
o List at least one policy action that the Federal Reserve has taken to confirm that direction.
o Explain the effects of monetary policies on the economy's production and employment.
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The expert examines the federal reserve monetary policy.

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Primarily, money acts as a medium of exchange. As a matter of fact, money was invented and developed to facilitate the buying and selling of products and services. Now, money has also become the standard measure of the value of wealth either of an individual or on an entity.

The central bank which includes the Federal Reserve manages the nation's monetary system using several tools. Some of these tools are:
1. The Fed funds interest rate - the funds rate significantly affects the level of money available in the system. The higher the rate, the lower is the money available in the system.
2. The reserve requirement - the higher reserve requirement financial institutions have to deposit with the Fed, the lower the money available for lending.
3. Open market operation - the Fed can buy and sell US Treasury in the market to affect the level of money available in the system.

The objectives and goals of the monetary policy in the United States are actually written in the Federal Reserve Act which created the Federal Reserve. Thus, the Board of Governors and the Federal Open Market Committee seeks "to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates" (Federal Reserve, ...

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