Chapter 15.1, Problem 2R

To determine

To create: a chart explaining the way Fed clears checks, supervises members, setting and managing reserves and supplies paper money.

Explanation of Solution

Federal Reserve Functions
Clearing checks	After the checks issued on the paying entity have been submitted for payment to that organization, the Reserve Banks must debit the Federal Reserve account or its correspondent of the paying institution.
Supervising members	Supervision involves monitoring individual banks ' financial position and assessing their compliance with laws and regulations. Bank regulation contains the setting up of banking system laws and guidelines.
Setting and managing reserves	When Fed decides to give banks more reserves, the interest rate it pays can be reduced, and thus tempts banks to borrow more. In comparison, it can drain reserves by increasing its pace and persuading banks to cut borrowing.
Supplying paper money	The Fed creates liquidity through open market operations, i.e. through purchasing securities on the market with new funds, or by generating bank reserves that are approved by commercial banks.

Economics Concept Introduction

Introduction: The Federal Reserve System (FRS) is the United States' central bank, and arguably the world's most powerful financial institution. It was developed to provide a free, scalable, and stable monetary and financial framework for the nation.