Complexities of the U.S. Financial System
The United States financial system has several complexities, and it is impacted by various environmental factors such as the economy and federal regulations. Some of the major components in the U.S. financial system include financial markets and the U.S. Federal Reserve. As one of the major elements of the U.S. financial system, financial markets have considerable impacts on the economy, businesses, and individuals. Financial markets can basically be described as platforms where companies in an economy access capital to expand or hedge their risks. Generally, these markets help to efficiently guide the flow of investments and savings in the economy is a manner that promotes the collection of capital and the production of goods and/or services.
The U.S. financial markets have considerable effects on the economy because they provide platforms through which companies generate cash for growth, lessen risks, and investors make money (Amadeo, n.d.). For instance, the U.S. stock market impacts the economy when companies increase their earnings and investors make profits, which keeps the economy growing. In addition, the U.S. financial markets impact businesses though creating a fair and regulated system for businesses to accumulate huge capital for growth. One of the major ways...
In this case, the financial markets allow businesses to offset risk with commodities and contracts on foreign exchange futures. With regards to the impact of financial markets on individuals, one of the ways is through investment in the stock market. People invest in stocks and may make profits or losses based on the existing market risks.
The other important component of the U.S. financial system is the Federal Reserve, which is the federal bank of the United States. The Federal Reserve has a unique governing structure that includes 12 regional Reserve Banks, the Board of Governors, and a federal government agency. The primary roles of the Fed include acting as a regulatory and supervisory authority over several financial institutions and activities, ensuring the safety and soundness of fiscal institutions, ensuring stability in the financial markets, and promoting fair and reasonable treatment customers during financial transactions ("Supervision and Regulation," n.d.). In today's economic environment, the Federal Reserve has been effective in these primary roles by helping maintain stability in light of economic challenges.
The primary roles of the Board of Governors including making U.S. monetary policy, supervising the work of the Federal…
