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Finance Glossary

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Over 700 finance terms, Shmooped to perfection.

Federal Reserve System


The Federal Reserve is the central bank of the U.S. You can’t just waltz in and open an account at The Fed, though—this bank is only for the federal government and for other banks.

The Fed has a big impact on the economy because it decides what interest rates will be and controls how much money is out there in the economy. The Federal Reserve also sets up all sorts of rules for other banks. It's like the granddaddy of all banks, and other banks have to follow its lead.