ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -1. Overview of the Federal Reserve System. The Federal Reserve performs five key functions in the public interest to promote the health of the U.S. economy and the stability of the U.S. financial system.

Detailed explanation-2: -The Board of Governors–located in Washington, D.C.–is the governing body of the Federal Reserve System. It is run by seven members, or “governors, ” who are nominated by the President of the United States and confirmed in their positions by the U.S. Senate.

Detailed explanation-3: -The term “monetary policy” refers to the actions undertaken by a central bank, such as the Federal Reserve, to influence the availability and cost of money and credit to help promote national economic goals. The Federal Reserve Act of 1913 gave the Federal Reserve responsibility for setting monetary policy.

Detailed explanation-4: -The Federal Reserve conducts the nation’s monetary policy by managing the level of short-term interest rates and influencing the availability and cost of credit in the economy. Monetary policy directly affects interest rates; it indirectly affects stock prices, wealth, and currency exchange rates.