Why is the Federal Reserve System of interest?

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pohnpei397's profile pic

pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted on

In talking about the Federal Reserve System of the United States, it is of interest because it has a huge impact (potentially) on the United States economy.  This is because of the fact that the Federal Reserve is the central bank for the United States.

As the central bank for the country, the Fed can do things like raising and lowering interest rates.  This often impacts the amount of economic activity that goes on in the country.  The Fed can also raise and lower the money supply by buying or selling government bonds.  This, too, affects the level of economic activity in the country.

By its actions, then, the Fed can have an impact on the economic health of the nation.  Therefore, it is (or should be) of interest.

william1941's profile pic

william1941 | College Teacher | (Level 3) Valedictorian

Posted on

The Federal Reserve System or the Federal Reserve or the Fed is the body that has the responsibility of overlooking the banking system of the country.

It helps in maintaining financial stability of all the banks by rules and regulations put into place. It controls the monetary situation in the country by controlling the interest rates, and liquidity. An increase in the interest rates by the Fed results in an increase in saving, and people having to pay more for their loans and mortgages. It also reduces the amount of money being invested in the creation of new industries as business owners find it costlier to borrow money. A reduction in the interest rates has an opposite effect.

The actions of the Fed are closely watched by economists, business analysts and generally by every person, as they affect everyone who is part of the economy.

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