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Module 13 Lesson 1 Mastery Assignment by Jennie Madden

The Fed

The central bank in the US is called the Fed and it was created in 1913. Banks who need money will get it from the Fed. They can also buy stocks in the Fed and earn dividends. The Fed is controlled by the Board of Governors. The Advisory Counsel will keep people informed about the economy and what is going on with the Fed. The Federal Open Market Committee makes decisions that affect the economy by changing money supply. The Fed oversees commercial banks, enforces laws that deal with consumer borrowing, and acts as a government to banks. They use the Monetary Policy to control the cost of borrowing money according to the economy. If they want to lower interest rates they will have to move the supply line to the right. The Feds can manipulate the money supply by raising or lowering discount rates. This means that they can change the rates they charge banks for loans. It will normally lower if they want to stimulate the economy. Also, they can raise or lower the reserve. The reserve is the percentage of money a bank must keep in the Federal Reserve Bank. If they raise the percentage then the banks will have to put more money into the Federal Reserve Bank. Lastly, they can have Open Market Operations which is the purchasing or selling of US government bonds and treasury bills. Money is highly important to keeping the United States in order. With the help of the Fed money is regulated into the economy. There are different types of banks such as the commercial banks that are savings and bank accounts. Also, there are savings and loan associations which give out loans to people looking to buy a house. Lastly, there are credit unions which are non-profit and sponsored by other people. Money does not just sit in vaults in a bank. It is loaned out in order to keep it regulating. Then it is easier to keep track of everyones money.