The Federal Reserve
  1. The Federal Reserve: Introduction
  2. The Federal Reserve: What Is The Fed?
  3. The Federal Reserve: Duties
  4. The Federal Reserve: Monetary Policy
  5. The Federal Reserve: The FOMC Rate Meeting
  6. The Federal Reserve: Conclusion

The Federal Reserve: Introduction

Most people are aware that there is a government body that acts as the guardian of the economy - an economic sentinel who implements policies designed to keep the country operating smoothly. Unfortunately, most investors do not understand how or why the government involves itself in the economy.

In the U.S., the answer lies in the role of the Federal Reserve, or simply, the Fed. The Fed is the gatekeeper of the U.S. economy. It is the bank of the U.S. government and, as such, it regulates the nation's financial institutions. The Fed watches over the world's largest economy and is, therefore, one of the most powerful organizations on earth.

As an investor, it is essential to acquire a basic knowledge of the Federal Reserve System. The Fed dictates economic and monetary policies that have profound impacts on individuals in the U.S. and around the world. In this tutorial, we'll learn about how the Fed is structured, find out who Alan Greenspan and Ben Bernanke are and talk about monetary policy and the Federal Open Market Committee (FOMC) rate meeting.

The Federal Reserve: What Is The Fed?

  1. The Federal Reserve: Introduction
  2. The Federal Reserve: What Is The Fed?
  3. The Federal Reserve: Duties
  4. The Federal Reserve: Monetary Policy
  5. The Federal Reserve: The FOMC Rate Meeting
  6. The Federal Reserve: Conclusion
  1. Deficit

    The amount by which a resource falls short of a mark, most often ...
  2. Maintenance Margin

    The minimum amount of equity that must be maintained in a margin ...
  3. Purchasing Power

    The value of a currency expressed in terms of the amount of goods ...
  4. Monetary Policy

    Monetary policy is the actions of a central bank, currency board ...
  5. Cost, Insurance and Freight - CIF

    A trade term requiring the seller to arrange for the carriage ...
  6. International Monetary Fund - IMF

    An international organization created for the purpose of standardizing ...
  1. Why do commercial banks borrow from the Federal Reserve?

    Commercial banks borrow from the Federal Reserve primarily to meet reserve requirements when their cash on hand is low before ... Read Full Answer >>
  2. Which nations' economies have reserve ratios?

    Most developed economies require a reserve ratio for their banks and other depository institutions, though there are some ... Read Full Answer >>
  3. Why would the Federal Reserve change the reserve ratio?

    The Federal Reserve would change the reserve ratio if it wanted to use that part of its monetary policy to either expand ... Read Full Answer >>
  4. Who are some real life examples of "doves" in the finance world?

    Real-life examples of "doves" in the finance world include Janet Yellen, Paul Krugman, Ben Bernanke, Bill Dudley, Narayana ... Read Full Answer >>
  5. Are so-called self-offering and self-management covered by "Financial Instruments ...

    As the Financial Services Agency (FSA) explains, self-offering of interests in collective investment schemes falls under ... Read Full Answer >>
  6. How does lower borrowing costs affect new airlines in the aerospace industry?

    Lower borrowing costs can help a new airline afford to obtain aircraft as well as pay for operating expenses such as salaries ... Read Full Answer >>
  7. How does the law of supply and demand affect monetary policy in the United States?

    The law of supply and demand affects monetary policy in the United States through the adjustment of interest rates. Interest ... Read Full Answer >>
  8. How does inflation affect a company's short-term investments?

    Inflation marginally erodes a company's short-term investments. Short-term investments are typically ultra-safe liquid assets, ... Read Full Answer >>
  9. What impact does the Federal Reserve have on a bank's profitability?

    The Federal Reserve impacts a bank's profitability with its influence on interest rates and the money supply. The discount ... Read Full Answer >>
  10. Why is purchasing stocks on margin considered more risky than traditional investing?

    Buying on margin involves borrowing money from a broker to purchase stock. A margin account increases your purchasing power ... Read Full Answer >>
  11. Why do supply shocks occur and who do they negatively affect the most?

    The exact nature and cause of supply shocks is imperfectly understood. The most common explanation is that an unexpected ... Read Full Answer >>
  12. Why are treasury bond yields important to investors of other securities?

    The yields on U.S. Treasury instruments, notably 10-year Treasury bonds, are considered to be an important measuring stick ... Read Full Answer >>
  13. What is the history of the S&P 500?

    The S&P 500 was introduced by Standard & Poor's in 1957 as a market index to track the value of 500 large corporations ... Read Full Answer >>
  14. How do interest rate changes affect the profitability of the banking sector?

    The banking sector's profitability increases with interest rate hikes. Institutions in the banking sector such as retail ... Read Full Answer >>
  15. What is the difference between holdover float and transportation float?

    There are millions of bank deposits made on a daily basis by businesses and individuals. When the bank receives a check for ... Read Full Answer >>
  16. What are the implications of a high Federal Funds Rate?

    A high federal funds rate discourages banks from borrowing from one another, which tightens the money supply. Raising the ... Read Full Answer >>
  17. What are some different kinds of expansionary policy?

    Expansionary policy is a macroeconomics strategy that seeks to stimulate the economy by expanding the money supply. When ... Read Full Answer >>
  18. What is the difference between Keynesian economics and monetarist economics?

    Monetarist economics is Milton Friedman's direct criticism of Keynesian economics theory. Simply put, the difference between ... Read Full Answer >>
  19. Why are bond yields calculated in terms of basis points?

    Basis points, or bps or "bips," are often used in finance to measure meaningful changes less than 1% in size. There are two ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  2. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  3. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  4. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
  5. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
  6. Cost Of Funds

    The interest rate paid by financial institutions for the funds that they deploy in their business. The cost of funds is one ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!