Essay about Questions On The Federal Reserve Act

721 Words Nov 26th, 2015 3 Pages
Problem Set No. 4

Question 1
Section 2A of the Federal Reserve Act describes the monetary policy objectives of the Federal Reserve. It states that the Board of Governors and the Federal Open Market Committee objectives are to maintain the money supply and credit of the economy through high employment rates, stable prices and moderate long term interest rates.

Question 2
Section 12A of the Federal Reserve Act describes the creation, members, meetings, participation of reserve banks, regulations and governing principles of the Federal Open Market Committee.

Creation, Members and Meetings
This section of 12A declared the creation of the Federal Open Market Committee. It states that the Federal Open Market Committee members (elected annually) consists of the Board of Governors and presidents from five other Federal Reserve Banks. At least four times a year committee meetings are to be held in Washington, DC with each member receiving one vote.

Participation of Reserve Banks; Regulations of Committee
This section of 12A declares that no bank can engage or decline to engage in open market operations unless under specific directions and regulations by the Federal Open Market Committee.

Governing Principles
This section of 12A states that all purchases and sale of paper listed in Section 14 of the Federal Reserve Act are eligible to be used by the Federal Open Market Committee for open market operations. The Federal Open Market Committee should consider the economy when…

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