Question

Whats the operational mechanics of the Federal Reserve System in terms of its structures and governance using specific details. In other words, how does the system work on a day-to-day basis?

Answer 1

The federal reserve has 3 components.

1. The board of governors directs monetary policy.
2. Federal Open Market Committee oversee the open market operations.
3. Federal reserve bank that work with the board to supervise the commercial banks.

Functions:

1. Manage inflation and maintain stable inflation. It sets the inflation target of for example 2%. So, they strive to achieve the target inflation in the economy.
2. Regulates the banks in the economy. So that the bank may not default the money of the customers.
3. They maintain the stability of the financial markets.
4. It provides the banking services to other banks.