America is still the biggest power in the world today, both politically and economically. But as things are not great at the political side, we will discuss its economy. To be precise, we will discuss the business of FED.

“So, what is FED?” you may ask. Let me break it down for you: Fed stands for the central bank of U.S. It is commonly known as FED and it regulated the monetary and financial system of the U.S. It is also called, officially, the Federal Reserve.


The creation of FED was actually to save the nation from “financial panics” in 1913, with the enactment of Federal Reserve Act. In 1907, New York Stock Exchange fell almost by half and this led to a financial crisis in the following 3 weeks. This state of panic gradually spread over the whole nation. Banks and businesses began to enter bankruptcy, because vast numbers of people across the nation started to withdraw their money from the local banks.

Local banks did not have any say in other banks and the U.S. had to watch this local financial crisis became spread over the whole country. If there was a central bank that would control this trend and help out these banks, this crisis might have been avoided.

With Great Depression in 1930s and Great Recession in 2000s, the role of Federal Reserve System was expanded. Not this institution’s main target was to avoid another 1907 financial crisis, but gradually the targets of FED also got expanded.

Other responsibilities of the Federal Reserve System includes maximizing employment, stabilizing prices, supervising and regulating banking institutions, to strengthen U.S. standing in the world economy.


Target: Aim, goal

To expand: To get bigger

To regulate: To control or maintain

To strengthen: To make stronger

To avoid: To keep away from


What does “FED” stand for?

  1. Federal Reserve
  2. Federal Education
  3. Federal Forces
  4. Federal Finance

What happened in 1907?

  1. FED was created
  2. There was a financial crisis
  3. Local banks were doing OK
  4. New York Stock Exchange gained profits

According to the passage, which of the following is not a responsibility of the FED?

  1. Maximizing employment
  2. Stabilizing the prices
  3. Strengthening the U.S. standing
  4. Employing new graduates of Economics Department

[toggle title=”Answers”]

(1) Federal Reserve

(2) There was a financial crisis

(4) Employing new graduates of Economics Department

Son Yazılar