Essay on Money and the Federal Reserve

1002 Words Nov 22nd, 2011 5 Pages
The Federal Reserve and Money
William L. Reed
University of Phoenix
Economics
212
Watson Ragin
April 20, 2010

The Federal Reserve and Money
“Money is the set of assets in the economy that people regularly use to buy goods and services from other people” and money serves three functions as a unit of account, a store of value, and as a medium of exchange. (Mankiw, 2006) A unit of account is unstable over time due to inflation and is unpredictable whereas a store of value must be able to be stored and retrieved at a later date similar to gold, silver, or real estate. Today’s money does not have a good store of value because most monies or currency are guaranteed as a medium of exchange by the government’s word which may also be
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With these tools the Federal Reserve can control the money supply and the well being of the economy.
The Federal Open Market Committee (FOMC) is a committee made up of the Board of Governors of the Fed and presidents of the Federal District Banks and makes the decisions on how the government will control the money supply through monetary policy. The FOMC holds eight yearly meetings and reports to the Congress every quarter.
In the latest quarterly report, Chairman Ben Bernanke reports that economic activity in the second half of 2009 turned up after declining for six quarters this supported by an improvement in financial conditions, stimulus from monetary and fiscal policies, and a recovery in foreign economies. With increased business and household confidence spending and expansion of the economy should remain stable.
Mr. Bernanke also reports that the inflation is likely to be subdued for some time because of the sustainable resource slack in costs and with stable longer-term inflation expectations. The GNP or Gross National Product rose about 4% over the second half of 2009 and the unemployment rate continued to contract but at a much slower pace than the first half. Hiring remains weak but job losses have slowed and the duration of unemployment has lengthened significantly. The Committee judged that the costs of the economic

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