Running head: Macroeconomic Impact on Business Operations
University of Phoenix
MBA 501
October 4, 2006
As my economics teacher, Tim Hamilton, use to say "The Fed is not the Government!!!!" This leads to the question, what is the Fed? The Federal Reserve Bank, commonly referred to as the Fed was created in 1913 due to numerous bank panics of the time. "Demand for the creation of a centralized banking system was strong after a series of bank panics, in 1873, 1893, and 1907." (Moen & Tallman, 2003) The Federal Reserve is the central banking system of the United States.
The Federal Reserve
The basic structure of the Federal Reserve System includes the Board of Governors, Federal Open Market Committee, Federal Reserve Banks and member banks.
The Board of Governors consist of seven members appointed by the President and confirmed by the Senate. Members are selected to terms of 14 years with the ability to serve for no more than one term. The Federal Open Market Committee comprises the seven members of the board of governors and five representatives selected from the Federal Reserve Banks. The president of the Federal Reserve Bank of New York is a permanent member, while the rest of the banks rotate on a yearly basis. The role of the Federal Open Market Committee, commonly known as the FOMC, is to formulate the nation's monetary policy. "The term "monetary policy" refers to what the Federal Reserve, the nation's central bank, does to influence the amount of money and credit in the U.S. economy. What happens to money and credit affects interest rates (the cost of credit) and the performance of the U.S. economy." (2006)
Some of the main goals of the Federal Reserve in con ...