Textbook Questions
Textbook Question
The Federal Reserve Board is responsible for monetary policy in the United States. Monetary policy involves changing the rate of growth of the supply of money in circulation in order to affect the amount of credit, thereby affecting business activity in the economy (FRB: Publiciation, 2008). There are three areas in which these policies are monitored the Board of Governors, the Federal Advisory Council, and the Federal Open Market Committee. The Board of Governors directs the operation on the Fed along with supervision over the twelve Federal Reserve district banks and regulated certain activities of member banks and all other depository institutions (FRB: Publiciation, 2008). The twelve districts include Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco. They meet eight times a year in Washington, DC. In addition, four other Reserve Bank Presidents serve in rotation and contribute to the Committee's discussions and deliberations (FRB: Publication, 2008).
The President of the United States with the approval of the Senate appoints the seven full-time members of the Board of Governors the President chooses one member as a chairperson. Each member of the board serves for 14 years. The terms are arranged so that an opening occurs every two years (FRB: Publication, 2008).
Prior to establishing the central bank, the United States did not have a money manager and the financial system was similar to the nation itself, "diverse and subject to uneven growth" (San Francisco) (FRB: Publication, 2008). This led to frequent depressions and financial panics, and after the Bank Panic of 1907, which consisted of heavy withdrawal of funds, large im ...