Fiat money refers to currencies that have minimal or no intrinsic value themselves (not backed by commodities like gold or silver) but are defined as legal tender by the government, such as banknotes and coins.

The Federal Reserve System is the central bank of the United States. It performs five general functions to promote the effective operation of the U.S. economy and, more generally, the public interest.

The Board of Governors of the Federal Reserve System is responsible for the discount rate and reserve requirements, and the Federal Open Market Committee is responsible for open market operations.

The Federal Reserve controls the three tools of monetary policy, Open market operations, The discount rate and Reserve requirements.

The federal funds rate is the rate at which depository institutions (banks) lend reserve balances to other banks on an overnight basis.