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The Federal Reserve System and the Money Supply

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Should the Federal Reserve System control the nation's money supply?

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Solution Summary

The solution briefly describes the rationale for why the Federal Reserve System controls and regulates the country's money supply.

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The Federal Reserve System's role in regulating the supply of money is an exercise of its monetary policy.

The primary responsibility of the Board members is the formulation of monetary policy (Federal Reserve, 2003).

The mandate of the Federal Reserve System is to "maintain employment, keep prices stable, and keep interest rates at a moderate level by regulating monetary policy" (FRB: Mission, 2006).

Regulating ...

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