ANALYSIS OF THE FEDERAL RESERVE
INTRODUCTION
A
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Although many news programs discuss the Fed and its chairman, Alan Greenspan, and while many people know that the Fed somehow affects interest rates and that interest rates affect the economy, fdw understand thd relationship between the Fed and the American economy. This research considers some of the key points surrounding the Federal Reserve, its effects on the American economy, and the role of the chairman.The Fed conducts monetary policy by setting the rates that member banks charge each other; this, in turn, provides a baseline for the interest rates that banks charge their customers since they must charge more than they pay for funds in order to realize a profit. That explains the mechanics of how the Fed conducts monetary policy. The issue of monetary policy extends well beyond that, however. The Fed is mandated by Congress to keep interest rates stable and unemployment low. This is predicated on the idea that an economy at so-called "full employment" is operating at its most efficient from an economic standpoint (Blinder, 1996). However, the mechanism that the Fed has available to it, changing interest rates, does not have immed
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Approximate Word count = 788
Approximate Pages = 3 (250 words per page)
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