What is the role of the Federal Reserve System?

The Federal Reserve System plays a crucial role in regulating the money supply and maintaining stability within the banking system. As the central bank of the United States, the Federal Reserve is primarily tasked with controlling inflation, managing employment levels, and providing a stable financial environment. By adjusting interest rates and open market operations, the Federal Reserve can influence how much money is circulating in the economy. This regulation ensures that banks operate smoothly and that consumers and businesses have access to credit and financial services.

In addition to managing the money supply, the Federal Reserve oversees the banking system's overall stability, which includes monitoring financial institutions for risks and ensuring that they have sufficient capital to operate. This function is vital for preventing bank runs and maintaining public confidence in the financial system. Overall, the Federal Reserve System's activities directly impact economic performance and the broader financial landscape.