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Prior to the creation of the Federal Reserve (the Fed), the U.S. Treasury conducted monetary policy...

Prior to the creation of the Federal Reserve (the Fed), the U.S. Treasury conducted monetary policy in a rudimentary fashion. During the 1870s, for example, if it appeared that the economy demanded more money, the Treasury purchased government securities in bond markets. Compare monetary policy as it is conducted by the Fed with how it might be conducted by the Treasury today. Begin with a brief comparison of the two institutions (e.g., purpose, degree of independence, broad sketch outlining their tasks), continue with a brief discussion of two reasons (per institution) why each institution would conduct monetary policy (i.e., under what economic circumstances), and finish with two externalities (per institution) the economy would realize from each institution’s decisions

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