The Federal Reserve and Bernanke
The Federal Reserve Board consists of seven members appointed by the President and approved by the Senate. Of them, two are chosen by the President to be the Chair and Vice Chair. Members serve on the Board for terms of 14 years; terms for the Chair and Vice-Chair are four years. The long length of the appointments is important due to the nature of the Board's work. The Board of Governors [Board] for the Federal Reserve System are charged with "setting the nation's monetary policy to promote the objectives of maximum employment, stable prices and moderate long-term interest rates" ("Purposes and Functions," 2005, p.15). Members must have assured longevity in their post to ensure consistency and stability in their monetary policy decisions. The Federal Reserve has three methods through which it controls the supply of money: open market operations, the discount rate and reserve requirements. Open market operations consist of the purchase and sale of securities. Control of the
The supply of money must be regulated because the success of our society is fundamentally linked to the flow of money. Simply put, the actions of the Board have a profound affect on every citizen's daily lives. For example, the Board has the ability to spur growth by lowering the discount rate which then causes the banks to lower interest rates, effectively making money cheaper for all of us. With cheap money, we can buy more things, take more risks and thus spawn more development. Conversely, if our spending becomes out of control and no one is saving any money, we run the risk of inflation: paying more for things than they are worth. Thus, the Board can increase the discount rate, making money more expensive and giving us more incentive to save. Maintaining this delicate balance is the charge of the Federal Reserve System and the members of the Board. purchase and sales could relate to either the price or the quantity of reserves. Decisions regarding open market operati
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Approximate Word count = 666
Approximate Pages = 3 (250 words per page double spaced)
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