Complexities of the U.S. Financial System/Assignment 1
FIN 100: Principles of Finance
The U.S. financial markets definitely play a big role in the economy. Unless people invest in businesses, there is no way that they can get started. This is also how they eventually grow in the future in order to meet county's needs and demands. The amount of stocks bought and sold each day directly impact the economy. Prior to the United State's stock market crash in 1929, there was an economic boom. Many Americans had already invested a tremendous amount of money in France. Once the French economy inflated, so did the economy her ...view middle of the document...
Due to the economy being down, banks are not willing to lend home purchasers very much money to receive a mortgage. Retirement funds are also affected by a bad economy. People can no longer afford to put any money away. Many individuals also begin to take money out of their 401K prematurely, because they have no other choice. Education becomes a luxury instead of a necessity. Parents stop putting funds I their children's college savings. Last but not least, unemployment occurs. Organizations can no longer afford to have as many employees. This is when lay offs happen. Employees who are fortunate enough to keep their positions are over worked and under paid.
The Federal Reserve manages the United States' economy along with the government but is not under the government's control. The Federal Reserve is basically the most powerful bank in the country. When other banks need money, they come to the Federal Bank. This bank performs typical tasks such as depositing, making loans to member banks and helps with loans between banks by using deposits. The Federal bank also determines what the interest rates for certain loans will be, as well as the bank reserve requirement.(Taillard, 2012.). The Federal Reserve is the middle man for funds distribution. The head of the central banking system of the U.S., is the Chairman of the Federal Reserve. The chairman is selected by the president of the United States and also serves a four-year term with the consent of the U.S. Senate. The Federal Reserve System is composed of a total of seven board members to include the Chairman. All of the members except the Chairman, serve a fourteen-year term. The Federal Reserve Board of Governors is responsible for the monetary policy and serves as a dependent political structure. Whenever the interest rates go up, this affects...