, and each vote on the conduct of open market operations. The network of twelve regional banks performs various functions, including; operating a nationwide payments system, distribution of currency and coin, supervising and regulating member banks, and serving as banker for the United States Treasury.The Federal Open Market Committee (FOMC) is a major part of the Federal Reserve System. It is made up of the Board of Governors, the president of the Federal Reserve Bank of New York, and presidents of four other Federal Reserve Banks. The FOMC is responsible for making decisions about the conduct of open market operations in order to influence the monetary base.Part IIMonetary PolicyThe Federal Reserve Act, signed into law by President Woodrow Wilson in 1913, spelled out the goals of monetary policy. It said that, when conducting monetary policy, the Federal Reserve System and the Federal Open Market Committee should strive "to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates."The most important of these goals, of today's monetary policy, is price stability. When prices of goods and services rise (inflation), economic growth is slowed down. There is similar reaction to employment levels, as unemployment rates will increase. This also creates uncertainty in the economy, making it difficult for consumers, government, and businesses to make decisions about the future. The Federal Reserve conducts Monetary Policy by affecting the money supply and interest rates. They have three tools they can use. The first tool is open market operations. Open market operations, is the most prevalent tool used in monetary policy today. Open market operations involves the buying and selling of U.S. government securities by the FED. When the FED buys or sells a security, it changes the amount of reserves. Open market operations will be discussed in further detail, later in this paper.The seco...
