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The Structure And Functions Of The Federal Reserve System In Maintaining Economic Stability

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    The Structure and Functions of the Federal Reserve System in Maintaining Economic Stability In an essay of at least 3 paragraphs outline the structure of the Federal Reserve System and the function it serves in keeping the economy stable. What is the structure of the Federal Reserve System, and how does it function to maintain economic stability? Answer : Federal Reserve System is the central banking system of the United States of America. It is composed of the following parts: a) The Board of Governors of the Federal Reserve : The Federal Reserve System is overseen by the Board of Governors of Federal Reserve. The seven members of the Board of Governors have a staggering term of 14 - year. They are appointed by the President and confirmed by the Senate. b) The Federal Open Market Committee (FMOC) : The FOMC is composed of the seven members of the Board of Governors and five Reserve Bank presidents. The president of the Federal Reserve Bank of New York serves on a continuous basis; the presidents of the other Reserve Banks serve one - year terms on a rotating basis. The committee meets eight times a year in private to discuss the cost and availability of credit, for business and consumers, across the country. c) Twelve District Reserve Banks: According to Federal Reserve Act United States is divided into twelve Federal Reserve district. Each Federal Reserve Bank monitors and reports on economic and banking condition in its district. d) Member Banks: All nationally chartered banks are required to join the Federal Reserve System. The remaining members are state chartered banks that join voluntarily. The Federal Reserve System has several key functions to keep the economy stable. Some of them are: a) The supply of currency to the economy is controlled by Federal Reserve . Only Federal Government has the authority to issue currency u nder the Federal Reserve System . The district Federal Reserve Banks issue paper currency. The federal reserve replaces the worn and torn bills with fresh ones. b) The Federal Reserve provides a system o f check collection and clearing. The fed clears about 20 billion checks per year.

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