Student Question

Describe the major and minor roles of the Federal Reserve.

Expert Answers

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The Federal Reserve plays a large number of roles.  For a full discussion of all of these roles, please follow this link.

The minor roles of the Fed are mainly ones that simply facilitate economic activity.  For example, the Fed distributes currency to the various banks in the country.  As another example, the Fed acts as a check clearing system when checks are written on one bank and deposited in another.  

The most important role of the Fed (its major role) is as the maker of monetary policy for the United States.  In this role, the Fed is charged with keeping the entire economy stable through changing interest rates and through the buying and selling of government securities.

In these ways, the Fed plays roles that are relatively trivial and roles that are of utmost importance to the economy.

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