Essay about The United Stated Federal Reserve Board

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1. What is the Federal Reserve Board (the Fed) and how does it attempt to prevent and curtail unemployment?
The United Stated Federal Reserve Board (the Fed), a component of the Federal government, conducts monetary policy. The Fed essentially plays the role for the nation’s banks that these banks play for us. Just as we borrow money from the banks, the banks borrow money from the Fed. Just as we pay interest on the money we borrow, banks pay interest on the money that they borrow from the Fed. The Fed can use monetary policy to decrease unemployment by lowering the interest rate that it charges banks. If banks are able to pay a lower interest rate to borrow from the Fed, they are likely to lower the interest rate that they charge the rest of us. This means that consumers are more likely to borrow to purchase cars or homes, and businesses are more likely to borrow to finance investment in new plants or equipment. Thus business will hire more workers to meet the increased demand for goods, decreasing unemployment. The Fed uses monetary policy to put the brakes on the economy as often as it uses monetary policy to stimulate it.
(If unemployment falls too low for the good of employers, central banks will intervene: raising interest rates to re-establish enough unemployment to restrain wages and reinforce labor discipline. Even if they didn’t, investment and job creation would eventually falter as a result of diminishing profitability until sufficient unemployment exists…