The Federal Reserve and How It Works (Infographic)

Since its creation in 1913, the Federal Reserve has played a pivotal role in the United States’ economy.  Based in Washington D.C., the Federal Reserve is led by the Board of Governors and has 12 Federal Reserve Banks located throughout the country.  While the Federal Reserve cannot directly predict the economy’s future because of unforeseen events such as war, technological breakthroughs, or medical outbreaks, the Federal Reserve does put measures in place to establish a healthy and stable economy.  With the Federal Reserve, price stability and the unemployment rate are monitored, and actions are taken to ensure stability with both of these conditions.

Created as a security measure to prevent banks from running out of money, the Federal Reserve provides many additional benefits to the American economy which has a direct correlation with the global economy.  It creates monetary policy which allows for consistency and uniformity in the banking world with regards to discount rates, interest, and other such factors.  In addition, the Federal Reserve controls payments from private banks which allow them to receive credit and serves as the middle man between private banks and the U.S. Treasury.  Banking industry supervision is performed by the Federal Reserve through enforced regulations and administered banking tests.

Even though the Federal Reserve was founded by Congress through the Federal Reserve Act, it works as an independent entity of the government.  Unique because it is neither owned by the government or a private organization, the Federal Reserve still follows rules and can have actions reviewed to safeguard ethically-responsible practices.  The Federal Reserve is held accountable by frequent testimony in Congress and having information released publicly through press conferences and published material.  With its impartiality and objectivity, the Federal Reserve is able to positively impact the American economy as well as the global economy.

The following infographic provides interesting facts and insight on the Federal Reserve.  The Federal Reserve holds monumental power on the American economy, and it has many unique duties and responsibilities to fulfill.