The Federal Reserve System has four main responsibilities: 1) regulating bank holding companies and state banks, 2) supplying money and credit to maintain stable prices and full employment, 3) ensuring a smooth functioning payments system, and 4) acting as the government's bank. It has three instruments of monetary control: changing the discount rate, changing reserve requirements, and buying or selling bonds in the open market. Changing the discount rate and reserve requirements can increase or decrease the amount of money in circulation, while buying and selling bonds removes or adds money to the economy.