The Federal Reserve
Ways the Federal Reserve can expand the money supply
What does the FED do?
One of the feds responsibilities is to maintain money supply at the level they believe is best for the economy. In order to do that they have to create or destroy millions of dollars.
How it works
- Most money deposited in the bank isn't actually kept there, it’s loaned out. When this happens, more money is able to be spent which makes the money supply increase in the country.
- The FED increases money by increasing bank deposits. Conversely, they can decrease money supply by decreasing bank deposits.
- They also buy and sell bonds which is a debt issued by a company or agency in order to borrow money for a certain amount of time. The FED makes decisions over monetary policy to help maintain employment. It also supervises and regulates banks to make sure they are safer places for people to keep their money.
- · The FED clears checks, processes electronic payments, and distributes coins and paper money to the nation’s banks, credit union, savings and loans associations.
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- · The FEDs mandate is to” promote sustainable growth, high levels of employment, stability of prices to help preserve the purchasing power of the dollar and moderate long-term interest rates.”
- FED makes sure we have a healthy economy.