What are the major financial institutions in the American economy; what are their functions and which of them are able to create money?

: The major financial institutions in the American economy include: - The Federal Reserve System - Commercial banks - Savings and loan associations (S&Ls) - Credit unions - Non-bank financial institutions (e.g., investment banks, mutual funds, and insurance companies)

: 1. The Federal Reserve System: Serves as the central bank of the United States, conducting monetary policy, regulating and supervising banks, providing financial services to depository institutions, and maintaining the stability of the financial system. 2. Commercial banks: Accept deposits, make loans, and provide various financial services to businesses and individuals. They play a crucial role in the economy by providing a safe place for deposits and facilitating the flow of funds through loans. 3. Savings and loan associations (S&Ls): Similar to commercial banks, but traditionally specialized in providing residential mortgage loans. They also accept deposits and offer a range of other financial services. 4. Credit unions: Member-owned, not-for-profit financial cooperatives that offer a range of banking services, including deposits, loans, and financial services to members. Credit unions offer better interest rates and lower fees than commercial banks because they are not focused on generating profits. 5. Non-bank financial institutions: These institutions do not take deposits but provide various financial services, such as investment banking, mutual funds, and insurance products. They serve essential roles in financial markets, offering various investment opportunities and contributing to economic growth.

: Out of the major financial institutions mentioned, the Federal Reserve System and commercial banks have the ability to create money. 1. The Federal Reserve System: The Fed can create money through open market operations, such as buying government securities or lowering reserve requirements for banks. This increases the amount of funds in the banking system, allowing banks to lend more and thus essentially creating money in the economy. 2. Commercial banks: Banks can create money by lending out a portion of the deposits they receive. When a bank makes a loan, it credits the borrower's account with the loan amount. This creates new deposits in the banking system which can be lent out again, resulting in a multiplication of the initial deposit, known as the money multiplier effect. This process of fractional reserve banking allows commercial banks to create money.