Notes

Final Answer Part 1


“Federal Reserve Act.” Board of Governors of the Federal Reserve System, Board of Governors of the Federal Reserve System, 10 Mar. 2017, www.federalreserve.gov/aboutthefed/fract.htm.

Jackson, Anna-Louise. “Quantitative Easing Explained.” Edited by Benjamin Curry , Forbes, Forbes Magazine, 23 Feb. 2021, 10:07am, www.forbes.com/advisor/investing/quantitative-easing-qe/.

Roche, Cullen. “Elasticity Of Money Is A Feature, Not A Bug.” SeekingAlpha, SeekingAlpha, 12 Dec. 2017, 1:28 PM ET, seekingalpha.com/article/4131372-elasticity-of-money-is-feature-not-bug.

Yglesias, Matthew. “The Fed and the 2008 Financial Crisis.” Vox, Vox, 13 May 2015, www.vox.com/2014/6/20/18079946/fed-vs-crisis.

I believe the Federal Reserve Act of 1913 (Fed Act) is an important legislative act to the current economy. There are numerous benefits and actions that were established with the Fed Act that have been expanded upon for use in today's economy. From FederalReserve.gov it is stated, "The Federal Reserve Act of 1913 established the Federal Reserve System as the central bank of the United States to provide the nation with a safer, more flexible, and more stable monetary and financial system."

One of the jobs for the Federal Reserve (Fed) is to keep an elastic money supply. An elastic money supply in a short example means that the money supply is able to expand when there is not enough money supplied to borrowers and contract when there is excess money available to borrowers. This expansion and contraction capabilities of the money supply is what makes it elastic. In the past when the Fed Act was first established, keeping an elastic money supply meant having enough gold and silver to keep up with the needs of the economy.

While gold and silver are no longer the drivers for the money supply, there are some present-day examples of the Fed trying to keep the money supply elastic. One economic downturn that has greatly influenced my childhood was the Great Recession during 2007-2009. The Fed's actions to expand the economy were to lower interest rates—lowers the cost of borrowing, provide help to failing financial intuitions, and perform qualitative easing. Qualitative easing is a type of monetary policy were the Fed purchases longer-term financial assets such as government bonds and other financial assets from member banks, thus providing money to the economy. These as well as other actions are the very ones that were used in 2020 during the Covid-19 pandemic and actions we are still benefiting from. The Fed's duty of keeping an elastic money supply is significant to not just as a method of recovering from economic hardship but to also lessen the burden of inevitable hardship on the economy. The Fed has kept up the duty of keeping the money supply in the past, it is currently doing so, and I believe it will continue.