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By the end of this section, you will be able to:

  • Explain the structure and organization of the U.S. Federal Reserve
  • Discuss how central banks impact monetary policy, promote financial stability, and provide banking services

In making decisions about the money supply, a central bank decides whether to raise or lower interest rates and, in this way, to influence macroeconomic policy, whose goal is low unemployment and low inflation    . The central bank is also responsible for regulating all or part of the nation’s banking system to protect bank depositors and insure the health of the bank’s balance sheet.

The organization responsible for conducting monetary policy    and ensuring that a nation’s financial system operates smoothly is called the central bank    . Most nations have central banks or currency boards. Some prominent central banks around the world include the European Central Bank, the Bank of Japan, and the Bank of England. In the United States, the central bank is called the Federal Reserve—often abbreviated as just “the Fed.” This section explains the organization of the U.S. Federal Reserve and identifies the major responsibilities of a central bank.

Structure/organization of the federal reserve

Unlike most central banks, the Federal Reserve is semi-decentralized, mixing government appointees with representation from private-sector banks. At the national level, it is run by a Board of Governors, consisting of seven members appointed by the President of the United States and confirmed by the Senate. Appointments are for 14-year terms and they are arranged so that one term expires January 31 of every even-numbered year. The purpose of the long and staggered terms is to insulate the Board of Governors as much as possible from political pressure so that policy decisions can be made based only on their economic merits. Additionally, except when filling an unfinished term, each member only serves one term, further insulating decision-making from politics. Policy decisions of the Fed do not require congressional approval, and the President cannot ask for the resignation of a Federal Reserve Governor as the President can with cabinet positions.

One member of the Board of Governors is designated as the Chair. For example, from 1987 until early 2006, the Chair was Alan Greenspan. From 2006 until 2014, Ben Bernanke held the post. The current Chair, Janet Yellen, has made many headlines already. Why? See the following Clear It Up feature to find out.

Who has the most immediate economic power in the world?

Chair of the federal reserve board

This image is a photograph of Janet Yellen.
Janet L. Yellen is the first woman to hold the position of Chair of the Federal Reserve Board of Governors. (Credit: Board of Governors of the Federal Reserve System)

What individual can make financial market crash or soar just by making a public statement? It is not Bill Gates or Warren Buffett. It is not even the President of the United States. The answer is the Chair of the Federal Reserve Board of Governors. In early 2014, Janet L. Yellen , shown in [link] became the first woman to hold this post. Yellen has been described in the media as “perhaps the most qualified Fed chair in history.” With a Ph.D. in economics from Yale University, Yellen has taught macroeconomics at Harvard, the London School of Economics, and most recently at the University of California at Berkeley. From 2004–2010, Yellen was President of the Federal Reserve Bank of San Francisco. Not an ivory tower economist, Yellen became one of the few economists who warned about a possible bubble in the housing market, more than two years before the financial crisis occurred. Yellen served on the Board of Governors of the Federal Reserve twice, most recently as Vice Chair. She also spent two years as Chair of the President’s Council of Economic Advisors. If experience and credentials mean anything, Yellen is likely to be an effective Fed chair.

Questions & Answers

how is saving important
Gahima Reply
I think so
yahaya
for feature use
Amos
maybe not .saving is important pillar of economics .
Ray
Why did economic important
Aminata Reply
i asked about aloucation function
Ali Reply
uumm don't knol
Tawe
utility maens satisfactions
Yussif Reply
what about price elasticity of demand ... can yu explain deep
Tawe
hello
Au
hello gentle girls and men's economics brothers
Au
ok
Au
P
Osei
Price elasticity of demand is the degree of responsiveness to quantity demand of a commodity to a change in the price of the commodity in question
Osei
small wholsales like rural grocery stores sometimes exist even though they do not earn economic profits.How can you explain this
Kelly
was!
Prempeh
what are the 5 basic problem of an economy
Richard
the sum of individual demand in the economy is otherwise known as what?
Akon Reply
150p-2q=58 is it a supply or demand curve explain?
Rotich Reply
The above equation is a supply curve because quantity has a postive relationship with the price. That is as the prices increases quantity also keeps increasing and vice versa and this only applies to supply. 150p-58=2q 150p/2 -58/2=2q 75p -29=q ....q=75p-29 where q=quantity supplied p=price
Emmanuel
when q=1 ...p=0.4 q=10...p=0.52 so curve is increasing so it's supply curve
Harshita
Quantity keeps increasing as price also increases and vice versa
Emmanuel
so Emmanuel is that your final equation
Rotich
how then can you calculate equilibrium price since that's the quantity and then illustrating it in a diagram
Rotich
the other equation is 2q+10p=200
Rotich
to find equilibrium price we should get both the demand and supply functions so that we can equate the two
Emmanuel
make a the subject of the demand eqn and equate the demand and supply eqns
Emmanuel
alternative name for macroeconomics?
Akon
Policy economics
Caleb
hello sorry but i want to ask is this group chat for grade12
gospel
hey guy
Targan
ok
muqtaar
what is the meaning of unitary in economics
Katanku Reply
what is equilibrium ?
Gift Reply
equilibrium simple means equal to or balance to be equal
Au
what is deman
Andoh Reply
Demand is what consumer needs.
almas
not only that but also their ability to purchase what they need
Atanga
Demand is what consumers are willing to purchase and able to pay for.
Caleb
Demand is anything one can be able to purchase and possess at any given time.
elvis
demand is the ability and willingness to buy a specific quantity of goods and services, with the given price and at a particular period of time
Ibrahim
Demand for what is it for money or for goods, please specify.
MUNTARI
demand is the desire and ability of a consumer to acquire goods and services at a given price within a period of time
swallow
@muntari -pls this is economics class they are using economics term ok
Napoleon
demand means the ability to acquire a commodity with a strong purchasing power
okhiria
Yea what is utility
Tawe
producer equilibrium under alternative market structure
Muhammad Reply
what is abnormal demand
Arabi Reply
Howdoes income affects the demand of a commodity
Kessie Reply
Is the slope of demand curve Negative or Positive
Kessie
Is the slope of demand curve Negative or Positive
Kessie
Is the slope of demand curve Negative or Positive
Kessie
Is the slope of demand curve Negative or Positive
Kessie
Is the slope of demand curve Negative or Positive
Kessie
income affects the demand of a commodity in two ways, that is positive and negative. increase in income results in positive effect, that is more units Will be demanded than before when the Price of the good remains constant. Negative effect, decrease in income results in less units Will be demanded.
Atanga
Negative
Atanga
Hi
Bayong
Request
Massoud
Nice info
Massoud
negative
Francis
Monopoly is a market structure where there is one firm who dominates the industry.In US monopoly is defined when a firm controls 25% of the market
Emmanuel Reply
Monopoly is a market structure where there is one firm who dominates the industry.In US a monopoly is defined when a firm controls 25% of the market.
Emmanuel
That's right but,we have to define it in African context.👏👏👏
MUNTARI
great time to do the same way about anyone else in mind
KANNEH
In Ghana for instance,The electricity company (ECG) enjoys monopolistic powers
Emmanuel
whether in africa or US monopoly is defined the same, the major thing to consider is the major ingridient of the subject which says a market structure were there is one firm who dominates the market or induatry.
Napoleon
Yeah We Must just appreciate that in that market there is one firm dominating the market or industry .
Emmanuel
are you sure... as I know it has firm dominant in some sectors
Dawal
Monopoly is a market situation with only one seller. A natural monopoly exists when the monopolist's solo position is due either to the exclusive possession of some essential input, or to the existence of economies of scale so that no entrant can be profitable once an incumbent firm is established.
Nureni
You guys are great.
MUNTARI
Thanks
Massoud
what is monopoly
Belinda Reply
the forces of dd and ss
Kemg Reply

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Source:  OpenStax, Principles of economics. OpenStax CNX. Sep 19, 2014 Download for free at http://legacy.cnx.org/content/col11613/1.11
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