Discussion- Ch15 – Coursework Example
Federal Reserve Economic Goals The Federal Reserve System uses four main tools open market operations, reserve requirements, discount rates, and credit controls to achieve certain economic goals in the economy. The Federal Reserve System aims at performing four main economic goals including ensuring stability in the financial system. A stable financial system allows the citizens to have confidence in the economy and the financial situation in the country allowing providing an economic environment for saving, investment and transfer of money. The benefits of a financial system include augmented accessibility to mortgages, gain loans, financing for businesses, and facilitates the use of credit card by the consumers. Ensuring price stability is the other function of the Federal Reserve System ensuring that inflation that reduces the purchasing power of investments and purchases in the economy (Inflation rate of less than 3%, Hafer, 156). The Federal Reserve System makes use of monetary tools to ensure price stability when inflation rate increases. Economic growth is the third role played by the Federal Reserve System allowing for employment, success of businesses in production and selling of goods and services, and an increased quality of living in the economy. The fourth goal of the Federal Reserve System is ensuring currency stability that allows the government, individuals, and businesses plan for the future effectively. The impact of effective planning is that it allows the economy to thrive. The other economic goals of the Federal Reserve System are ensuring full employment (unemployment rate of less than 4%), regulation of banking and financial institutions, and interest rate stability in the economy (Hafer, 156).
Jia uses the different tools of the Federal Reserve System to explain the economic functions of the FED. I agree with the goals of the FED explained by Jia, and he goes ahead to use an example to explain further making his explanation more understandable especially on reserve requirement. He concludes that the FED monetary policy aims at achieving the four functions despite that the FED functions are not limited to the four main functions.
Kelkis provides a number of responsibilities played by the Federal Reserve System. However, he states that the Federal Reserve System uses monetary policy to manage national check clearing policies and oversee the FDIC. I believe these roles are undertaken by the FED through other measures and not via monetary policy as stipulated in the question.
Hafer, R W. The Federal Reserve System: An Encyclopedia. Westport, CT: Greenwood Press, 2005. Internet resource.