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The Fed may seem confusing to many, but the abilities and responsibilities are huge!
We have a Fed for several reasons. It prevents total economic failure due to one bank fail. It keeps the money flowing between banks and makes loans to banks. It watches over the commercial banks make sure that things/ regulations are being conducted correctly. Finally, makes sure the economy is doing well, (keeping low inflation) and predicts what happens to the economy and inflation, then plans accordingly.
The Fed can be confusing, so here's a comparison from the Fed to competitive swimming
We have a Fed for several reasons. It prevents total economic failure due to one bank fail. It keeps the money flowing between banks and makes loans to banks. It watches over the commercial banks make sure that things/ regulations are being conducted correctly. Finally, makes sure the economy is doing well, (keeping low inflation) and predicts what happens to the economy and inflation, then plans accordingly.
The Fed can be confusing, so here's a comparison from the Fed to competitive swimming
- The 3 parts of the Fed are Board of Governors, Reserve Banks, Open Market Committee.
- The Open Market Committee are like the officials and USA swimming. They decide the rules of swimming and can change the rules of swimming at any point when having meetings. For example, they have recently changed the ruling on breaststroke pullouts.
- The Reserve Banks are like the Coaches, as they are responsible for organizing dual meets and when the commercial banks, or the swimmer, need a loan the coaches will give positive encouragement and suggestions instead of money to help the swimmers, but they are similar.
- Lastly the Board of Governors are the parents of the swimmers. Instead of studying trends and making policies for commercial banks, many parents make cumulative times for distance events and study the trends of the swimmers’ times. They also make food or schedules to benefit the swimmers’ times, like the policies for commercial banks