Question 1: Deposit Creation Chart

A         400

B         3600

C         360

D         3240

E          324


Question 2: Tools of the Federal Reserve Bank

A         Federal Discount Rate

B         Open market operations





G         sell



Question 3: Organization of the Federal Reserve System

The Federal Reserve System is the main banking system of the United States. It was established under the Federal Reserve Act. Its original intention was to shield the American market from panic due to catastrophes. Currently its functions include moderating the nation’s monetary strategy, checking on the demeanor of the banking institutions, upholding the permanence of the economy of the nation, and providing fiscal services to banks, financial institutions, and the U.S. government (McEachern 30).

The organization of the Federal Reserve System includes the Federal Reserve board of governors who are allotted these positions by the President of the United States, the Committee of the Federal Open market, and Federal Reserve banks that are located in different states of the nation (McEachern 45). These banks are twelve in number, including private banks and a couple of advisory councils. The monetary policies are made up and set by the Federal Open Market Committee. The committee is made up of seven constituents of the board of governors and the heads of the regional banks. Only five bank presidents are involved in the balloting course of action. The duties of the central bank are unique in that they are divided into diverse categories that are independent, private, and public. The currency used is used is set by the department of treasury.

The Federal Reserve is self-governing within the government. This independence is approved the board of governors. This means that it does not require mandate from the executive or legislative arm of government. The congress is the only institution that overlooks the Federal Reserve. The board of governors are recommended by the president and approved by the congress. The government is also responsible for setting the salaries of the senior employees of the Federal Reserve. The government handles all the system’s earnings that have accrued through the year. This is after the member banks have been paid a dividend of 6% (McEachern 78).

Federal Reserve Banks do not rely on the government for funding but generate their own income. This income comes primarily from interest earned on government securities. The securities are gained from actions of the policies of the Federal Reserve. They also raise funds through charging the services that they offer to banks and other financial and depository institutions. The Federal Reserve Banks are however non-profit making organizations and thus return all the annual profits to the U.S. treasury.



Works Cited

McEachern, William. ECON Macro 2. Chittenden, VT: South-Western Pub, 2010. Print.

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