Question

Please read the following and respond with a minimum 150 word commentary

In your own words, explain the role of the Federal Reserve (the Fed)? How much discretion should the Fed have? Should the Fed try to fine-tune the economy or simply keep money supply growing at a steady pace? Why?

Answer 1

Answer - The role of the Federal reserve is to control the supply of the money in the economy and maintain the stability in economy by maintaining the rates of inflation on target. For this ot has to use the contractionary and expansionary monetary policies in order to decrease or increase the supply of money respectively. The fed should work as an independent institution with no interference from government or any other public or private body in order to increase the efficiency , insure unbaisedness in operation. However the policies of the fed should be in coordination with the goals of government and overall well being of the society. Not just maintaining the stability of the money supply , but the fed should aim at continous fine tuning of the economy for the overall benefit and increase the welfare from the policies.