Federal Reserve System

Definition

The Federal Reserve System is America's central banking system, established in 1913 to provide the country with a safe, flexible, and stable monetary and financial system.

Analogy

Think of the Federal Reserve System as the school principal. Just like how a principal oversees all operations in a school, the Federal Reserve oversees America's monetary policy, regulates banks, maintains financial stability and provides financial services.

Related terms

Monetary Policy: The process by which a country's central bank or monetary authority manages its money supply to achieve specific goals.

Federal Open Market Committee (FOMC): This is the branch of the Federal Reserve that determines the direction of monetary policy.

Great Depression: A severe worldwide economic depression that took place during the 1930s. The timing varied across nations; in most countries it started in 1929 and lasted until late-1930s. It was directly related to U.S. stock market crash and failure of banking systems.