Macroeconomic Impact To achieve stability in the nation's economy, the creation of a centralized banking system was implemented to combat double-digit inflation. The Federal Reserve system was created in 1913 with the hope of increasing the supply of currency. Monetary Policy Monetary policy is the process by which the government, central bank, or monetary authority manages the money supply to achieve specific objectives. These goals include containing inflation, maintaining the exchange rate, achieving full employment or economic growth (Monetary Policy, Wikipedia). There are two forms of monetary policy, expansionary and restrictive. In expansionary policy, the Federal Reserve Bank (“Fed”) is used to fight unemployment by lowering interest rates and increasing the money supply. To do this, the Fed will purchase securities, lower the reserve ratio, or lower the discount rate. Its aim is to make bank loans cheaper and more available, thereby increasing aggregate demand, production and employment. In restrictive policy, the Fed will try to reduce aggregate demand by limiting the money supply and raising interest rates to fight inflation. The characteristics are opposite to those of expansionary policy. The Fed will sell securities, increase the reserve ratio and increase the discount rate. This is done to try to achieve monetary tightening in order to reduce spending and control inflation (McConnell & Brue, 2004, pp 11-12). Federal Reserve In the United States there are 12 regional Federal Reserve Banks, chartered by Congress to operate as an arm of the nation's central banking system. They are located in Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Lois, Minneapolis, Kansas City, Dallas, and San Francisco (Federal Reserve System). The Federal Reserve currently has two legislated objectives; are price stability and full employment. In 1978, the federal government was charged with promoting full employment and reasonable price stability through the Full Employment and Balanced Growth Act (Thorbecke, 2002, p. 255). One reason the government should continue to emphasize full employment is that, under the mandate, the United States has experienced low unemployment and low inflation. Secondly, the costs of unemployment are known to be considerable. Third, central bankers tend to be inflation averse and occasionally need to be prodded to pursue goals other than reducing inflation..