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Complexities Of The Us Economy Essay

563 words - 3 pages

Complexities of the U.S. Financial System

Professor Crawford

Finance 100

10/28/2014

Complexities in the US Financial System

The Federal Reserve System is the most powerful component of the US Economy. The Federal Reserve is made up of four components. There is a seven member Board of Governors that direct monetary policy. A 12 member Federal Open Market Committee (FMOC) that sets the target for the federal funds rate which also guides the Federal Interest Rate. 12 regional banks that supervise commercial banks in their respective regions, these regional banks also implement monetary policy for the commercial banks to follow. The FED also has a designated Economist who provide information and reports to congress.
The Federal Reserve’s primary function is to control inflation without triggering a recession. The FED’s work together with the Treasury ...view middle of the document...

” The Federal Reserve Board of Governors primary function is to set monetary policy. Janet Yellen is the current appointed Chairman of the Board of Governors. The Chairman serves as public spokesperson and representative of the Board and manager of the Board's staff.
The interest rate is guided by the federal funds rate. Interest rates are important to the US and global economies because the FMOC monitors the inflation rate and adjust the interest rate to accommodate the economies. Once the interest rate is set the system allows commercial banks to offer competitive interest rates to depositors in order to use their funds. If the rate was insufficient it would deter depositors from putting funds in banking institutions and seek alternatives like IRA, Roth IRA and investment securities. This is a major incentive for the US Economy and Global Economies. The banks compete against each other to secure the depositors funds and it affects the interest rate by making it stable. Foreign banks that operate in the US have the same privilege to use the services of the FED’s, this is why the interest rates impact economies globally.
The US financial markets impact business because money is available for loans to start businesses. Businesses may borrow for enhancements and increase employment. The impact affects individuals as well because consumer wants drive businesses to produce more product which requires more employment opportunities.
The US financial markets is complex in a since that it is a strategic system that works by involving multiple influencers striving for the same result. The US Economy is holding strong and has always been able to recover from adversity which is inevitable the impact it has had on individuals, businesses and global economies evident in lower US unemployment rates and interest rates are stable and low for businesses advantage.


References

1. http://www.frbsf.org/
2. http://www.the-economist.com-sub.biz/?&gclid=CNmM8LP83MECFahr7AodTw4AAg

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